The Bureau of Labor Statistics reported that producer prices for finished goods rose 0.7 percent in February, its fastest pace since September. The main driver of the higher number was increased energy prices, which were up by 3.0 percent for the month. This corresponds to a rise in average petroleum prices from $88.25 per barrel in December to $95.32 in February.  Intermediate and crude energy costs were also higher, suggesting that these costs will continue to flow through the process to finished goods in coming months.

Lower food costs at the finished goods level helped to ease the pain of increased energy prices. The prices of finished food products fell 0.5 percent in February, largely on lower costs for vegetables, eggs, and some meats.

Overall core inflation – which excludes food and energy costs – rose 0.2 percent in February, the same pace as the month before. Core inflation is currently operating at a 1.7 percent annual pace, down from 1.8 percent in January. This continues to keep pricing pressures below the Federal Reserve’s stated target of maintaining core inflation at 2 percent or less. As such, inflationary pressures remain in-check, at least for now.

With that said, producer prices for manufacturers have accelerated in the past month. Raw material costs for the sector increased 1.5 percent, and the year-over-year rate was 1.4 percent. The annual pace has picked up in February, as it had been 0.3 percent in January. The manufacturing industries with the greatest price increases were wood products (up 8.8 percent), leather and allied products (up 4.2 percent), food manufacturers (up 2.9 percent), and beverages and tobacco (up 2.7 percent). Decreases in input prices, though, were seen in the primary metal (down 5.9 percent), textile mills (down 0.6 percent), and computer and electronic products (down 0.3 percent) manufacturing sectors.

Chad Moutray is chief economist, National Association of Manufacturers.

The Bureau of Labor Statistics reported that producer prices rose 0.2 percent in January, the first increase since September. With that said, inflationary pressures remain modest, with core finished goods prices up just 1.8 percent over the past year. This is below the 2 percent goal stated by the Federal Reserve Board, and it reflects significant easing over the course of 2012, as described last month and as can be seen in the attached graphic.

More specifically, in January, energy costs continued to fall, down 0.4 percent for the month. Prices for finished energy goods – mostly from gasoline – have declined for four straight months, helping to lowering inflationary pressures. Food costs rose 0.7 percent in January, reversing the 0.8 percent increase in December. The largest contributor to this gain was higher vegetable prices. Outside of energy and food costs, other increases were found in the pharmaceutical sector and with some types of capital equipment.

A similar picture emerges for the manufacturing sector, which has experienced only a 0.7 percent increase in producer prices year-over-year. This is largely due to reduced energy costs, with raw materials for petroleum and coal products manufacturers down 4.4 percent since January 2012. Nonetheless, these costs were 0.9 percent higher in January on crude petroleum prices. (continue reading…)

The Bureau of Labor Statistics reported today that the producer price index (PPI) for finished goods rose 0.8 percent in April, building on the 1.0, 1.6, and 0.8 percentage point gains in the first three months of this year, respectively. (All of these figures are seasonally adjusted at annual rates.) Core inflation, which excludes food and energy costs, remained unchanged from the previous month, rising 0.3 percent.

Looking at the net output of manufacturing firms, the PPI rose 1.5 percent for the month and 8.5 percent from last year. Industries with the largest monthly increases in producer prices for April were petroleum and coal products, fabricated metal products, textile products, and food manufacturers.

The accompanying figure shows both the traditional and core PPI measures for the past year for each month. Core inflation has been modest, never rising above a monthly gain of 0.5 percent. Overall PPI, however, has shifted from deflationary pressures this time last year to a much faster pace in the past few months. Rising energy and raw material costs are having an impact.

When examining the PPI at different stages during the production process, it is also clear that pricing pressures exist for both intermediate and crude goods, as well. The PPI for intermediate goods rose 1.3 percent in April, with crude good prices up 4.0 percent.

Chad Moutray is chief economist, National Association of Manufacturers.