The Bureau of Labor Statistics reported that producer prices for finished goods were down 0.1 percent in November, extending the declines observed in September and October. On a year-over-year basis, producer prices have risen just 0.7 percent, illustrating the extent to which inflationary pressures have become so modest.
The decrease was once again largely attributable to reduced energy costs. The price of finished energy goods were off 1.5 percent and 0.4 percent in October and November, respectively. Gasoline prices were down 3.8 percent and 0.7 percent in those same months. Indeed, the price of West Texas intermediate crude fell from an average of $106.29 per barrel in September to $100.54 and $93.86 per barrel in October and November, respectively. The producer price index data reflect this decline with energy costs declining at the intermediate and crude levels, as well.
The cost of food was unchanged in November. Increased producer prices for beef, eggs, pork, and turkeys were offset by lower costs for bakery products, chickens, fruits, vegetables, and shortenings.
For manufacturers, raw material costs were down 0.6 percent in November, with input prices off 0.1 percent over the past 12 months. As such, the manufacturing sector continues to benefit from the recent deceleration in pricing pressures.
With that said, on a year-over-year basis there were a few instances where producer price increases have been somewhat significant. For instance, there were following manufacturing sectors experienced the largest increases in costs over the past 12 months: wood products (up 5.5 percent), leather and allied products (up 3.8 percent), nonmetallic mineral products (up 3.0 percent), paper (up 3.0 percent), plastics and rubber (up 2.3 percent), textile product mills (up 2.0 percent), and apparel (up 1.8 percent). Petroleum and coal products experienced the largest year-over-year decline in costs (down 4.0 percent) on reduced crude prices, with primary metals (down 2.0 percent) and food (down 1.3 percent) manufacturers also having lower costs over the past year.
In conclusion, this data is further evidence that inflation is not a significant problem, at least for right now. The Federal Reserve will meet next week to discuss monetary policy changes (where it may or may not begin tapering its asset purchases), and it will be encouraged by the fact that prices have stayed well below its target of 2 percent or less. The annual rate of core inflation – which excludes food and energy costs – was 1.3 percent according to this report, down from 1.4 percent the month before.
Chad Moutray is the chief economist, National Association of Manufacturers.
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