Producer Price Index: Price Rise Growth Continues

Continuing high year-over-year price growth, the Producer Price Index (PPI) rose 1% to 6.8% in April 2011.

The Producer Price Index for finished goods rose 0.8 percent in April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed increases of 0.7 percent in March and 1.6 percent in February. At the earlier stages of processing, prices received by manufacturers of intermediate goods climbed 1.3 percent in April, and the crude goods index rose 4.0 percent. On an unadjusted basis, prices for finished goods moved up 6.8 percent for the 12 months ended April 2011, the largest year-over-year gain since an 8.8-percent increase in September 2008.

The PPI is growing more and more volatile in recent times.  It is hard to explain the size of the difference between the export price index which is up 9.6% – and the PPI finished goods index only up 6.8% (analysis here) -as both indexes are a different mix of the same sector.

The growth in the PPI explained:

About three quarters of the April advance in the finished goods index can be traced to a 2.5- percent jump in prices for finished energy goods. Also contributing to the rise in the finished goods index, prices for both finished goods other than foods and energy and for finished consumer foods moved up 0.3 percent in April.

Finished energy: Prices for finished energy goods increased 2.5 percent in April, the seventh consecutive monthly advance. Over half of the April rise can be attributed to the gasoline index, which climbed 3.6 percent. Higher prices for liquefied petroleum gas and residential natural gas also were factors in the increase in the finished energy goods index.

Finished core: The index for finished goods less foods and energy moved up 0.3 percent in April, the fifth straight monthly rise. Nearly one-fourth of the April monthly advance can be traced to a 1.2-percent jump in civilian aircraft prices. An increase in the index for light motor trucks also contributed significantly to the rise in finished core prices.

Finished foods: Prices for finished consumer foods rose 0.3 percent in April after falling 0.2 percent in the prior month. Leading this advance, the index for eggs for fresh use surged 56.7 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 around 3% YoY.  Last month the CPI YoY change was 2.7% (analysis here).

The CPI for April 2011 will be released tomorrow.

Related Articles

Import Prices Up Over 11% in April 2011 by Steven Hansen

Chilling Headwinds: Energy Costs Stalling the Economy? by Steven Hansen

Shocks and Economic Recessions by James Hamilton

Study Says Fed Does Not Need to React to Inflation Caused by Commodity Prices (GEI News)

April 2011 Economic Forecast: Likely At Sub-Cycle Peak by Steven Hansen

Beware: Core Inflation Follows Food Inflation by Steven Hansen

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