Producer Price Index More Moderate Than Expected

March 2011 Producer Price Index (PPI), a measure of prices changes below wholesale level, indicated the growth in price increases were more moderate than expected.  Year-over-Year (YoY) rose from 5.6% to 5.8%.

Econintersect uses YoY change in its evaluation as there is too much noise (deviation) in the month-over-month (MoM) data.  The good news in the MoM data is that the rate of increase was in the range of increases in the last six months – last month the surge was double the average (analysis here).

From the press release:

The Producer Price Index for finished goods rose 0.7 percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed a 1.6-percent increase in February and a 0.8-percent gain in January. At the earlier stages of processing, prices received by manufacturers of intermediate goods climbed 1.5 percent in March and the crude goods index declined 0.5 percent. On an unadjusted basis, prices for finished goods moved up 5.8 percent for the 12 months ended March 2011, the largest year-over-year gain since a 5.9-percent advance in March 2010.

In March, nearly ninety percent of the increase in the finished goods index can be attributed to a 2.6-percent rise in prices for finished energy goods. Also contributing to the advance in the finished goods index, prices for goods other than foods and energy moved up 0.3 percent. By contrast, the index for finished consumer foods moved down 0.2 percent in March.

Prices for finished energy goods rose 2.6 percent in March, the sixth consecutive monthly advance. Over eighty percent of the March increase can be attributed to the gasoline index, which climbed 5.7 percent. Higher prices for liquefied petroleum gas and home heating oil also were factors in the rise in the finished energy goods index. (See table 2.)

The index for finished goods other than foods and energy moved up 0.3 percent in March, the fourth consecutive increase. About one-third of this advance can be traced to prices for light motor trucks, which rose 0.7 percent. An increase in the passenger car index also contributed to higher finished core prices.

Prices for finished consumer foods fell 0.2 percent in March, the first decline since August 2010. Leading the March decrease, the index for fresh and dry vegetables dropped 21.4 percent.

Econintersect has shown how the pricing changes moves from the PPI to the Consumer Price Index (CPI).  This large YoY change implies that the CPI – which will be released later this week, should come in between 2.0% YoY and 2.5% YoY.  Last month the CPI YoY change was 2.1% (analysis here).

The CPI for March 2011 will be released tomorrow.

Related Articles

PPI Does Not Look Good  by Steven Hansen

CPI Increases 2.1%:  Trend Line Up  by Steven Hansen

Producer Price Index Moderates in January 2011  by Steven Hansen

Energy Surging into PPI Future by Steven Hansen

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