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Producer Prices Rose at Fastest Pace in 13 Months in June

By | Economy, Shopfloor Economics | No Comments

The Bureau of Labor Statistics said that producer prices for final goods and services rose 0.5 percent in June, its fastest monthly pace in 13 months. At the same time, producer prices for final demand goods jumped 0.8 percent in June, extending the 0.7 percent gain seen in May. Food and energy prices were up 0.9 percent and 4.1 percent, respectively, for the month. Regarding energy, the price of West Texas Intermediate crude oil has risen from an average of $30.32 in February to $48.76 in June, its highest point since July 2015. Meanwhile, the rise in food prices in June for goods producers came largely from higher costs for beef, finfish and shellfish, fruits and melons, grains, oilseeds, pork and shortening and cooking oils. Despite the rises this month, food costs have trended lower over the past 12 months, down 2.3 percent, with energy prices off 11.3 percent year-over-year.

Producer prices for final demand goods and services have increased 0.3 percent since June 2015, up from being unchanged year-over-year in May. Core inflation also inched higher for the month, up from 1.2 percent year-over-year in May to 1.3 percent in June. That was the fastest pace for year-over-year core producer price growth since January 2015, and yet, overall pricing pressures remain under control for now. Indeed, core producer prices have remained below the Federal Reserve’s stated goal of 2 percent for 25 straight months. This frees the Federal Open Market Committee to continue pursuing stimulative monetary policies, albeit with a sense that prices are starting to accelerate somewhat.

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Producer Prices for Final Goods and Services Picked Up in May

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The Bureau of Labor Statistics said that producer prices for final demand goods and services rose 0.4 percent, extending the 0.2 percent gain seen in April. At the same time, the producer prices for final demand goods jumped 0.7 percent in May, its fastest pace in 12 months. Energy costs rose 2.8 percent in May on higher crude oil prices, which approached $50 per barrel for West Texas Intermediate crude by month’s end, levels not seen since July 2015. At the same time, food costs were up 0.3 percent, offsetting the 0.3 percent decline observed in the prior report. The rise in food prices in May for goods producers came largely from higher costs for chicken, eggs, fresh and dry vegetables, grains, oilseeds and pork. Despite the rises this month, food costs have trended lower over the past 12 months, down 2.7 percent, with energy prices off 14.2 percent year-over-year. Read More

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Producer Prices for Final Goods and Services Decreased by 0.1% in March

By | Economy, General, Shopfloor Economics | No Comments

The Bureau of Labor Statistics said that producer prices for final goods and services decreased by 0.1 percent in March, falling for the second straight month. The March decrease, however, stemmed mainly from services. The producer prices for final demand goods rose by 0.2 percent in March, increasing for the first time since June. Energy costs jumped 1.8 percent for the month on higher crude oil prices, which was enough to offset a decline of 0.9 percent on food prices. The decline for food costs in March for producers came largely from sharp drops in prices for eggs and fresh fruits and vegetables, along with lower prices for coffee, pork, poultry and shortening and cooking oils. Food costs have trended lower over the past 12 months, down 2.5 percent, with energy prices off 13.8 percent year-over-year. Read More

Producer Prices Were Unchanged in August

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The Bureau of Labor Statistics said that producer prices for final demand goods and services were unchanged in August. At the same time, producer prices for final demand goods were down 0.6 percent, extending the 0.1 percent decline observed in July. Goods prices were pulled lower by reduced energy costs, which fell 3.3 percent for the month. Indeed, the price of West Texas intermediate crude oil reached an 11-year low of $38.22 per barrel on August 24. Final demand energy costs were 19.6 percent lower in August than 12 months ago. Read More

Producer Prices Were Higher in July, Slowing from the Rate Seen in June

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The Bureau of Labor Statistics said that producer prices for final demand goods and services rose 0.2 percent in July, slowing from the 0.4 percent growth rate seen in June. At the same time, producer prices for final demand goods declined 0.1 percent, with reduced energy and food costs pulling the index lower. It was the first decrease in the goods index since April. Looking specifically at energy costs, final demand energy goods fell 0.6 percent for the month, ending two months of significant gains. Indeed, the average price of West Texas intermediate crude oil fell from $59.82 per gallon in June to $50.90 in July. (It has fallen further since then, closing at $42.23 a gallon on August 13 – its lowest level since March 2009.) To be fair, final demand energy goods costs were 17.7 percent lower in July than 12 months ago. Read More

Increased Food and Energy Costs Pushed Producer Prices Higher in May

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The Bureau of Labor Statistics said that producer prices for final demand goods and services increased 0.5 percent in May, rebounding from the 0.4 percent decline of April. Moreover, producer prices for final demand goods jumped 1.3 percent, led by increased costs for foods (up 0.8 percent) and energy (up 5.9 percent). Indeed, the price of West Texas intermediate crude oil rose from an average of $54.27 per barrel in April to $59.27 in May, helping to explain the additional cost for energy. Still, even with the increase in May, energy costs have declined 19.3 percent year-over-year, continuing to reflect the sharp decline in crude oil prices from earlier heights. Read More

Producer Prices for Final Demand Goods Have Fallen for 8 Straight Months

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The Bureau of Labor Statistics said that producer prices for final demand goods and services surprisingly fell 0.5 percent in February. The consensus expectation had been for an increase of 0.3 percent, particularly as petroleum prices have stopped falling. Indeed, final demand energy goods prices were unchanged as a whole in February, the first non-negative number since June. Yet, lower food prices helped to reduce producer prices for final demand goods for the eighth straight month, down 0.4 percent. In particular, there were lower prices reported for dairy products, fruits and vegetables, grains, meats and shellfish – precisely the areas that have seen significant increases over much of the past year. Food prices rose 4.3 percent in 2014, but declines in the first two months of 2015 have reduced these costs by 2.6 percent. Read More

Producer Prices Fell 0.8 Percent in January

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The Bureau of Labor Statistics said that producer prices for final demand goods and services declined 0.8 percent in January, falling for the fifth time in the past six months. Looking just at final demand goods, producer prices plummeted in January, down 2.1 percent and off for the seventh consecutive month. Reduced energy prices have contributed to the sharp decline in producer prices, with final demand energy goods down 10.3 percent in January alone. Indeed, West Texas intermediate crude sold for an average of $47.22 a barrel in January, down from the monthly average of $59.29 in December. Read More

Producer Prices for Final Demand Goods Fell in November for the Fifth Straight Month

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The Bureau of Labor Statistics said that producer prices for final demand goods and services declined 0.2 percent in November. Producer prices for final demand goods fell for the fifth straight month, down 0.7 percent or 1.7 percent since June. Much of that decline, as you might expect, stemmed from reduced energy costs, which has decreased 8.8 percent since June and was off 3.1 percent in November. Of course, petroleum prices have continued to fall since then, with West Texas intermediate crude selling for less than $59 a barrel today, a level last seen in mid-2009. This has helped to reduce overall pricing pressures in the economy. Read More

Lower Energy and Food Costs Push Producer Prices Down in September

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The Bureau of Labor Statistics said that producer prices for final demand goods and services were down 0.1 percent in September. It was the third straight month with inflationary pressures easing, a positive development that helps both businesses and consumers. On a year-over-year basis, final demand producer prices have risen 1.6 percent over the past 12 months, decelerating from 2.1 percent in May. Producer prices for final demand goods were off 0.2 percent, extending the 0.3 percent decline observed in August, with both food and energy costs lower.

Energy prices have fallen in four of the past five months, declining by 0.7 percent in September. One of the key drivers of this decrease was the fall in gasoline prices, down 2.6 percent for the month. Indeed, the price of West Texas intermediate crude was $97.86 per barrel on August 29, but by September 30, that figure had fallen to $91.17 a barrel. (It has declined further since then, closing at $81.84 per barrel yesterday. This could indicate further deceleration in energy and producer prices in October.)

Meanwhile, food prices also decreased 0.7 percent in September. After rising 5.4 percent from December to April, producer prices for final demand food products have eased by 1.5 percent. As such, the cost of food remained 3.8 percent higher in September than at the start of the year. This has largely stemmed from higher prices for meats, eggs, dairy and produce. The largest price declines in August were seen in beef and veal, chicken, cooking oils, eggs, grains, milled rice, pork, oilseeds and turkey products.

Beyond food and energy, core prices for final demand goods were up 0.2 percent. There were higher monthly costs for commercial products, floor coverings, industrial chemicals, pumps and compressors and women’s apparel. At the same time, producer prices for footwear, household appliances and furniture, jewelry, lawn and garden equipment, passenger cars, toys and games and truck trailers were lower.

Core inflation for final demand goods and services was 1.6 percent in September, down from 1.8 percent in August and 2.1 percent in May. As such, the reduction in inflation seen in the past few months should take some pressure off of the Federal Reserve Board as it prepares to normalize its monetary policies.

Chad Moutray is the chief economist, National Association of Manufacturers.