Here is the summary for this week’s Monday Economic Report:

In the first five months of 2013, manufacturing production has been virtually unchanged, according to the Federal Reserve Board, and capacity utilization in the sector edged lower from 76.4 percent in December to 75.8 percent in May. Production among manufacturers increased 0.1 percent in May, or up 1.7 percent year-over-year. The latest NAM/IndustryWeek Survey of Manufacturers predicted that the annual pace of production activity should increase to 2.8 percent by the fourth quarter of 2013. Manufacturing production will need to pick up for that to be true. Manufacturing export numbers have been soft, with higher taxes and across-the-board spending cuts dampening demand.

Regarding the NAM/IndustryWeek survey, manufacturers anticipate sales to increase 2.7 percent on average over the course of the next year. While this is higher than the 2.3 percent growth rate observed three months ago, it is below the 4.3 percent pace of 12 months ago. Larger businesses were more optimistic about sales and their company’s outlook than their small and medium-sized counterparts, with all respondents predicting sluggish hiring growth over the next year. The top concern, cited by 82.2 percent of respondents, was the rising cost of health insurance. The average health insurance premium increase in 2013 was 8.6 percent, with a 13.9 percent jump on average anticipated for 2014. The 2014 numbers suggest just how much uncertainty there is regarding insurance rates, with the perception they will go up significantly. I spoke about this survey and the general state of manufacturing on CNBC’s “Squawk Box” last Tuesday. (continue reading…)

The Bureau of Labor Statistics reported that producer prices for finished goods dropped 0.8 percent in November, adding to the 0.2 percent decline seen in October. The principal driver of the lower figure in November was the 4.6 percent decline in energy costs. Specifically, the price of gasoline fell over 10 percent for the month, helping to ease pricing pressures for businesses.

In contrast, food costs were up 1.3 percent, rising for the sixth consecutive month. Higher beef prices (up 8.2 percent) were largely responsible for the increase in finished food goods prices.

The bottom line is that the year-to-date change in producer prices for finished goods has fallen to 1.4 percent, from 2.3 percent in October and higher figures earlier in the year. With lower energy costs especially, we have seen these year-over-year rates decline from 4.2 percent in January to as low as 0.5 percent in July. Meanwhile, core producer prices – which exclude food and energy – are currently up 2.2 percent over the past 12 months. This also reflects significant easing, as core rates began the year at a 3.1 percent pace.

Manufacturers have benefits from a slower pace of growth for raw material prices. Producer prices were down 1.2 percent for the manufacturing sector in November, and over the past year, these costs have risen just 1.0 percent. The largest decline in costs was seen in the petroleum and coal products sector, which was down 7.8 percent. In contrast, the paper manufacturing sector had the largest increase for the month, with input costs up 0.9 percent.

Overall, these figures show that producer prices have slowed considerably over the past few months. As noted in yesterday’s Federal Open Market Committee statement, the Federal Reserve is currently less worried about inflationary pressures than about downward risks to economic growth and employment. That is why it continues to pursue extremely accommodative policies to attempt to stimulate growth. With prices in control for now, the Fed feels that it has the ability to focus on its employment targets, at least for now.

The Bureau of Labor Statistics will release consumer price index data tomorrow, which are largely expected to mirror those at the producer level.

Chad Moutray is chief economist, National Association of Manufacturers.

The Bureau of Labor Statistics reported that producer prices for finished goods fell 0.2 percent in October, its first decline since May. This follows two months of stronger growth in raw material costs – particularly for energy goods – with the producer price index (PPI) up 1.7 percent and 1.1 percent in August and September, respectively. The reversal in October was largely due to lower energy costs, down 0.5 percent for the month. Food prices rose 0.4 percent.

Core prices, which excludes food and energy costs , also declined by 0.2 percent in October. This helped push the year-over-year core inflation rate to 2.1 percent, down from 2.8 percent six months ago or 2.3 percent in September. This suggests that overall pricing pressures continue to ease and remain modest overall, and they are near the Federal Reserve Board’s key target of 2 percent or less.

Manufacturers have benefited from this easing of inflationary pressures, with the cost of raw materials in the sector also down 0.2 percent. Since October 2011, these costs have risen just 2.5 percent. The largest decline in costs was seen in the petroleum and coal products sector, which was down 2.5 percent on lower per barrel petroleum prices. In contrast, transportation equipment manufacturers had the greatest monthly increase in costs, up 1.2 percent.

Costs for intermediate goods were down 0.1 percent for the month; whereas, crude goods prices were up 0.9 percent. At the crude level, higher costs were attributed to increased natural gas and food and feedstock prices. When you look at core crude goods (excluding energy and food), they were lower (down 1.4 percent) on reduced metals costs.

Chad Moutray is chief economist, National Association of Manufacturers.

The Bureau of Labor Statistics reported that producer prices for finished goods rose 0.3 percent in July. This suggests a slight pickup in prices from the 0.1 percent gain of June. With that said, energy costs at the finished and intermediate levels continued to move lower. The main driver of higher producer prices this month was food, which rose 0.5 percent for finished goods this month. The price of meat – particularly beef and pork – was up significantly. 

Core prices – which exclude food and energy costs – rose 0.4 percent in June, and they have risen 2.6 percent over the course of the past year. This year-over-year figure suggests that overall inflationary pressures have eased appreciably since earlier in the year.

One of the primary forces behind this easing has been lower petroleum costs. For manufacturers, this has coincided with reduced raw material prices over the past few months. In July, producer prices for manufacturers dropped 0.6 percent, the fourth straight month of declines. Since July 2011, raw material costs have fallen 0.4 percent.

As noted, the leader was the petroleum and coal products manufacturing sector, with 4.1 percent lower costs last month and 9.9 percent lower year-over year. Other sectors with declining costs included primary metals (down 1.8 percent) and textile mills (down 0.8 percent). At the same, beverage and tobacco (up 1 percent), textile product mills (up 0.6 percent), food (up 0.5 percent), and nonmetallic mineral product (up 0.5 percent) manufacturers had higher raw material costs.

Costs for intermediate goods were 0.9 percent lower; whereas, crude materials were 1.8 percent higher. Crude food and energy costs were higher, which should translate into higher overall costs in the coming months as they move through the production process toward finished goods.

Overall, while producer prices were higher in July, these gains were mostly isolated in specific sectors. The larger trend of easing continues to be the case, especially for manufacturers.

Chad Moutray is chief economist, National Association of Manufacturers.

The Bureau of Labor Statistics reported that producer prices for finished goods were up 0.1 percent in June, its first increase since February. In June finished energy goods were down 0.9 percent. This follows declines of 1.1 percent, 1.4 percent, and 4.3 percent in March through May. Clearly, businesses have benefited from lower petroleum prices of late, as has the consumer. The June consumer price index data will be released on Tuesday, July 17.)

Core prices – which exclude food and energy costs – rose 0.2 percent in June, and have risen 2.6 percent over the course of the past year. Food prices continue to rise, up 0.5 percent for the month. (The recent news about corn yields should produce even higher food costs in the months ahead.) On the positive side, the core rate has fallen since February as petroleum prices have dropped; the year-over-year rate was 3.1 percent in January, for instance.

Manufacturers continue to see an easing of raw material prices, benefitting from lower energy costs. Producer prices within the industry fell 0.7 percent, bringing the year-over-year rate down to just 0.6 percent. In January, the year-over-year rate was 5.4 percent. Producer prices were mostly down in the various manufacturing sectors. 

The largest declines were seen in petroleum and coal products (not surprisingly, down 4.2 percent) and primary metals (down 1.4 percent). The furniture sector had the greatest monthly gain, up 0.3 percent. There were a number of industries with 0.1 percent gains in monthly prices, including machinery, electrical equipment and appliances, transportation equipment, and wood products.

Chad Moutray is chief economist, National Association of Manufacturers.  

The Bureau of Labor Statistics (BLS) reported that producer prices fell 0.1 percent in December, with lower food and energy prices driving the decline. Both food and energy costs for finished goods dropped 0.8 percent, reflecting the continued easing of both in recent months. When food and energy costs are excluded, the core PPI rate rose 0.3 percent. Year-over-year growth rates currently stand at 4.8 percent for all finished goods and 3.0 percent for core goods.

For manufacturers, producer prices declined 0.4 percent for the month, with costs up 6.0 percent since December 2010. The yearly change, though, represents an improvement from earlier in the year. In December, the sectors experiencing the largest monthly declines were petroleum and coal products (down 2.7 percent), primary metals (down 0.9 percent), textile mills (down 0.8 percent), leather and allied products (down 0.5 percent) and food manufacturing (down 0.4 percent).

The cost of intermediate and crude goods also fell, by 0.5 percent and 1.1 percent respectively. This, too, was led by declines in food and energy prices. 

Overall, this report suggests that inflationary pressures remain modest , with recent easing helping to ease the concerns that many manufacturers have had – particularly in the first half of 2011 – about pricing pressures. Nonetheless, many expect raw material and energy costs to rise in 2012, as seen in yesterday’s Empire State Manufacturing Survey and in other similar analysis. Indeed, the core PPI inflation rate edged higher each month in 2011, from 1.6 percent in January to 3.0 percent in December – a sign that higher costs are moving beyond food and energy, albeit not at an alarming pace.

Tomorrow, the BLS will report data on consumer prices.

Chad Moutray is Chief Economist, National Association of Manufacturers.