Producer Pricing Pressures Have Eased Throughout 2012

By January 15, 2013Economy

Lower food and energy costs helped to push producer prices down for the third consecutive month, according to the Bureau of Labor Statistics. The price of finished consumer foods dropped 0.9 percent in December, largely on reduced prices for beef, vegetables, and cheeses. At the same time, energy costs have fallen for each of the last three months and were down 0.3 percent in December.

Core prices – which exclude food and energy costs – rose 0.1 percent in December. This was the same rate as was observed in November. The year-over-year core inflation rate was 2 percent, which is the target set by the Federal Reserve Board. As the attached picture shows, the year-over-year percentage change in producer prices has fallen throughout 2012, beginning the year at 3.1 percent. This has helped to reduce pricing pressures for manufacturers and other businesses.

The cost of raw materials in the manufacturing sector dropped 0.4 percent in November, reducing the year-over-year growth to 1.2 percent. The largest monthly declines in costs were seen in the petroleum and coal products (down 2.3 percent), textile product (down 0.6 percent), food manufacturing (down 0.4 percent), and chemical (down 0.3 percent) sectors. Whereas, the steepest increases were observed in wood products (up 1.0 percent), primary metals (up 0.7 percent), and apparel (up 0.7 percent) manufacturers.

With all of that said, there is some potential for higher producer prices in the months ahead. Higher energy costs at the intermediate and crude levels pushed up overall producer costs at these levels by 0.3 percent and 2.5 percent, respectively. Crude petroleum costs, for instance, rose 9.4 percent for the month, a reflection of increased per barrel rates.

Chad Moutray is chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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