October 1994 Producer Price Index

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In October, the Producer Price Index for Finished Goods declined 0.5 percent seasonally adjusted for the second consecutive month, the Bureau of Labor Statistics of the U. S. Department of Labor reported today. The decreases in September and October followed increases in each of the previous 3 months. In October, prices received by domestic producers of intermediate goods rose 0.3 percent, the same as in September. Crude material prices fell 0.6 percent, the fourth consecutive monthly decline. (See table A.)

Among finished goods, the index for finished energy goods fell 1.2 percent in October after declining 2.9 percent a month earlier, and the index for finished consumer foods moved down 0.2 percent, the same as in September. The index for finished goods less foods and energy turned down 0.5 percent after several months of increases, as prices for motor vehicles rose less than the recent average for this time of the year. In accordance with our usual practice, new model year passenger cars and light trucks were introduced into the PPI in October.

Change in Except finished Inter- goods foods from 12 mediateCrude and months Month Total Foods Energy energy ago goods goods (unadj.) 1993 Oct. -0.1 -0.2 0.8 -0.3 0.2 0.1 2.2 Nov. 0.1 0.8 -2.1 0.4 0.4 0.2 -0.3 Dec. -0.1 0.6 -2.9 0.1 0.2 -0.3 -1.5

Before seasonal adjustment, the Producer Price Index for Finished Goods increased 0.2 percent in October to 125.8 (1982=100). From October 1993 to October 1994, this index advanced 1.0 percent. Over this same period, consumer food prices moved up 0.6 percent, the index for finished energy goods fell 2.2 percent, and prices for finished goods other than foods and energy advanced 1.8 percent. The Intermediate Goods index increased 3.0 percent during the 12 months ended October 1994, and crude material prices were 4.1 percent lower than a year earlier.

Finished goods

Prices for finished energy goods fell 1.2 percent in October after a 2.9 percent decline in September. Decreases continued, but at a slower pace when compared to September, for gasoline and home heating oil. By contrast, prices for residential natural gas moved down more in October than in September, and prices for residential electric power turned up after falling in the previous month.

Prices for finished consumer foods moved down 0.2 percent in October, the same as in September. Declines were registered for fresh fruits and melons, eggs, milled rice, finfish and shellfish, pork, and beef and veal. However, prices rose for fresh and dry vegetables, pasta products, roasted coffee, processed poultry, and for shortening and cooking oils.

After inching up 0.1 percent in September, prices for finished consumer goods other than foods and energy declined 0.3 percent in October, largely because the passenger car index fell 2.6 percent, after seasonal adjustment. Before seasonal adjustment, the passenger car index rose 5.7 percent, the same as last October, but less than the average for prior Octobers. (Because the timing of price changes for passenger cars has differed from year to year, precise identification of seasonal factors for this series is difficult.) Prices turned down after rising a month earlier for light trucks and prescription drugs. By contrast prices turned up after falling in the previous month for cosmetics and women's apparel. Price increases accelerated for sanitary papers, household glassware, lawn and garden equipment, over-the-counter drugs, and household flatware. Price increases slowed for tobacco products, alcoholic beverages, and books.

In October, the capital equipment index moved down 1.0 percent, the first monthly decline since a year ago. Most of the October 1994 decline was due to the indexes for light trucks, heavy trucks, and passenger cars. Prices also turned down after increasing in September for metal cutting machine tools. Price increases slowed for truck trailers, construction machinery, office and store machines, transformers, and textile machinery. By contrast, prices turned up after falling a month earlier for oil field and gas field machinery, and price increases accelerated for civilian aircraft, agricultural machinery, industrial material handling equipment, tools and dies, metal forming machine tools, railroad equipment, and mining machinery.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components increased 0.3 percent seasonally adjusted in October, the same as in September. Prices for intermediate goods less foods and energy increased 0.7 percent after several moderate advances. The index for energy goods fell slightly less in October than in the previous month, and the index for foods and feeds turned down after rising in September. (See table B.)

The rise in the index for nondurable manufacturing materials slowed to 1.5 percent in October from 1.7 percent in September. The rise in the primary organic chemicals index slowed to 0.2 percent in October from 9.7 percent a month earlier. In addition, indexes for plastic resins and materials, intermediate organic chemicals, and paper all rose less than in September. Prices for gray fabrics turned down after rising in the previous month. In contrast, the increase in prices for paperboard accelerated to 3.1 percent in October from 1.0 percent a month earlier. Indexes for woodpulp and alkalies and chlorine also rose more than in September. In addition, prices for processed yarns and threads rose after showing no change the month before.

The index for construction materials moved up 0.7 percent in October after a September increase of 0.5 percent. The plywood index increased 3.1 percent after rising 2.0 percent a month earlier. Indexes for millwork, gypsum products, and softwood lumber also rose more than in September. In contrast, the rise in the nonferrous wire and cable index slowed to 0.3 percent after increasing 2.4 percent in the previous month. Prices for fabricated structural metal products, wiring devices, plumbing fixtures and brass fittings, and concrete products also increased less than a month earlier. In addition, the index for heating equipment turned down after rising in the prior month.

Prices for durable manufacturing materials registered a 1.0 percent advance in October following September's increase of 0.8 percent. The index for flat glass turned up 1.4 percent after falling 1.6 percent a month earlier. Hot rolled steel sheet and strip prices also turned up after falling in September. In addition, indexes for aluminum mill shapes and plywood rose more than in the previous month. The rise in prices for copper and brass mill shapes, however, slowed to 1.7 percent from 5.3 percent in September. In addition, indexes for hot rolled steel bars, copper, and aluminum turned down after rising a month earlier. The index for intermediate energy goods declined 1.7 percent after decreasing 2.0 percent a month earlier. The decline in prices for gasoline slowed to 5.8 percent from 7.5 percent in September. In addition, indexes for jet fuels, industrial and commercial natural gas, and diesel fuel all fell less than a month ago. Prices for petroleum coke turned up after a September decline, and the commercial electric power index rose more than in the prior month. Conversely, indexes for industrial electric power and natural gas to electric utilities turned down after increasing a month earlier.

The Producer Price Index for intermediate foods and feeds moved down 1.0 percent in October, reversing its 0.4 percent advance the month before. The rise in the index for crude vegetable oils slowed to 0.8 percent from 11.5 percent in September. Prices for flour also rose less than in the prior month. Indexes for confectionery material, beef and veal, fluid milk products, and pork fell more than in September. In addition, prices for condensed and evaporated milk turned down after rising a month earlier. The decline in the index for prepared animal feeds, however, slowed to 0.4 percent in October from 1.6 percent in the previous month, and sugar prices turned up after a September decline.

Crude goods

The Producer Price Index for Crude Materials for Further Processing moved down 0.6 percent in October after falling 1.6 percent in September. The index for crude energy materials remained unchanged after falling a month earlier. In contrast, the crude foodstuffs and feedstuffs index turned down after rising in September, and the basic industrial materials index rose less than in the prior month. (See table B.)

The index for crude energy materials remained unchanged in October after falling for 3 consecutive months. The crude petroleum index rose 2.5 percent after dropping 11.1 percent in September. Coal prices rose about 1 percent after remaining unchanged a month earlier. By contrast, the natural gas to pipelines index declined, the sixth moderate decrease in the last 7 months.

The crude foodstuffs and feedstuffs index moved down 2.0 percent after rising 0.2 percent in September. The corn index turned down 5.4 percent after increasing 1.4 percent a month ago. Prices for unprocessed finfish, Louisiana rough rice, and for fresh fruits and melons also declined after rising in September. Indexes for wheat and fluid milk rose less than a month earlier. In addition, prices for slaughter cattle and soybeans fell more than in the prior month. In contrast, indexes for hay and Irish potatoes for processing both turned up after falling in September.

The crude nonfood materials less energy index moved up 0.9 percent in October following a rise of 1.3 percent in September. The raw cotton index turned down 9.1 percent following an increase of 2.8 percent in September. Prices for miscellaneous roundwood products also fell after increasing in the previous month. Indexes for copper ores and leaf tobacco rose less than in September. The rise in aluminum base scrap prices, however, accelerated to 13.1 percent from 3.6 percent in September. Prices for cattle hides as well as iron and steel scrap also rose more than a month ago. In addition, the index for construction sand and gravel increased after showing no change in September.

Net output price indexes for mining, manufacturing, and other industries

Mining. The Producer Price Index for the net output of the domestic mining sector declined 0.3 percent in October after falling 3.0 percent in the preceding month. (Net output price indexes are not seasonally adjusted.) Price declines for the oil and gas extraction industry group slowed from -4.6 percent in September to -0.9 percent in October. Prices rose more than in the previous month for the bituminous mining and the nonmetallic mining industry groups. Prices for the anthracite mining industry group increased after 6 months of no change. However, price increases slowed for the metal mining industry group. oweb=verHHHHHhIn October, the Producer Price Index for total mining stood at 72.0 (December 1984=100), 8.0 percent lower than a year earlier.

Manufacturing. Prices received by producers for the net output of the domestic manufacturing sector moved up 0.3 percent in October after falling 0.4 percent in September. Prices turned up 2.8 percent after falling 1.6 percent a month earlier for the transportation equipment industry group. Prices also turned up in October after falling in September for the apparel industry group. Price increases accelerated for the industry groups for rubber and plastic products and for paper and allied products. Prices continued to rise for the primary metal industries grouping. By contrast, prices turned down after rising somewhat a month earlier for the industry groups for lumber products, chemicals and allied products, and tobacco manufactures. Price increases slowed for the leather products industry group. The petroleum refining industry group index declined 3.9 percent for the second consecutive month. The food and kindred products industry group index also moved down the same amount as in September. The index for the net output of the domestic manufacturing sector stood at 121.4 in October (December 1984=100), 1.7 percent higher than a year earlier.

Other. Among other industries, the index for electric power utilities moved down 3.7 percent after showing no change in September. Prices turned down in October after rising a month earlier for truck rental and leasing, waste paper collection, ferrous scrap metal collection, tour operators, scheduled air passenger transportation, and psychiatric hospitals. Price increases slowed for airports and airport services and for tugging and towing services. Prices for line haul railroad operations were unchanged after falling in September. By contrast, prices turned up after falling in September for travel agencies, radio broadcasting, scheduled air cargo transportation, and passenger car rental. Prices rose faster in October than in September for local trucking except storage, water transportation of freight, not elsewhere classified, crude petroleum pipelines, nonferrous metal scrap collection, and for general medical and surgical hospitals. Price declines slowed for natural gas utilities. Prices continued to rise for other specialty hospitals. The index for air courier services was unchanged after rising a month earlier.

Information in this news release will be made available to sensory impaired individuals upon request. Voice phone:202-606-7828; TDD phone 202-606- 5897; TDD Message Referral phone number: 1-800-326-2577.

Elizabeth Spear (202) 606-7745 USDL 94-553 Shannon Martin (202) 606-7746 TRANSMISSION OF MATERIAL IN THIS RELEASE IS EMBARGOED UNTIL 8:30 A.M. (E.S.T.), THURSDAY, NOVEMBER 10, 1994

REPORT ON QUALITY CHANGES FOR 1995 MODEL VEHICLES

Passenger cars

The value of quality changes for a sample of nineteen (19) 1995 model domestic passenger cars included in the Producer Price Index for October averaged $146.81, according to estimates by the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor. This change represents about 36.4 percent of the average $403.43 yearly increase in producers' prices.

The retail equivalent of these quality changes averaged $173.35, representing about 31.9 percent of the average $543.23 yearly increase in manufacturer's suggested list prices. The $173.35 estimated retail level of quality change breaks down as follows:

* $53.51 for changes in accordance with 1990 Clear Air Act Amendments

* $119.84 for changes in accordance with Federal Motor Vehicle Safety Standard 208 (passive restraints), and other quality changes such as powertrain improvements, corrosion protection upgrades, warranty improvements, and changes in levels of standard or optional equipment.

Light trucks

The value of quality changes for a sample of twelve (12) 1995 model domestic light trucks included in the Producer Price Index for October averaged $261.41. This change represents about 39.8 percent of the average $656.59 yearly increase in producers' prices.

The retail equivalent of quality changes for domestic light trucks averaged $303.63, representing about 28.9 percent of the average $1,051.28 yearly increase in manufacturers' suggested list prices.

The value of quality changes for light trucks represent changes made to meet Federal Motor Vehicle Safety Standard 208, (passive restraints), Federal Motor Vehicle Safety Standard 214 (side impact standards), 1990 Clean Air Act amendments, as well as upgrades to powertrains, corrosion, protection, warranties, and changes in levels of standard or optional equipment.

Estimates of the value of quality change are based on a review by the BLS of data supplied by producers for similarly equipped 1994 and 1995 domestic models priced for the Producer Price Index. Most of the estimates of quality changes in this release are derived from information supplied for the Producer Price Index for October.

New seasonal adjustment method to be implemented

Effective with the release of PPI data for January 1995 on February 10, BLS will introduce a new system to calculate seasonally adjusted data. This new system will modernize and improve our basic methods of seasonal adjustment. Central to this change will be Statistics Canada's X- 11ARIMA/88 software, which will replace the Bureau of the Census' X-11 program for seasonal adjustment currently in use. To receive a summary report on the new methodology, please contact our Branch of Information and Analysis at 202-606-7705. Table 1. Producer Price Indexes and percent changes by stage of processing (1982=100)

1/ Comprehensive relative importance figures are computed 6/ Percent of total finished goods. once each year in December. 7/ Percent of total intermediate materials. 2/ Data for June 1994 have been revised to reflect the availability 8/ Formerly titled "Crude materials for of late reports and corrections by respondents. All data are subject further processing, excluding crude to revision 4 months after original publication. foodstuffs and feedstuffs, plant and 3/ Not seasonally adjusted. animal fibers, oilseeds, and leaf tobacco." 4/ Includes crude petroleum. 9/ Percent of total crude materials. 5/ Excludes crude petroleum. Table 2. Producer Price Indexes and percent changes for selected commodity groupings by stage of processing (1982=100 unless otherwise indicated)

See footnotes at end of table. Table 2. Producer Price Indexes and percent changes for selected commodity groupings by stage of processing - Continued (1982=100 unless otherwise indicated)

1/ Data for June 1994 have been revised to reflect 2/ Not seasonally adjusted. the availability of late reports and corrections by respondents. 3/ Not available. All data are subject to revision 4 months after original publication.

1/ Data for June 1994 have been revised to reflect the availability of late reports and corrections by respondents. All data are subject to revision 4 months after original publication.

2/ Prices of some items in this grouping are lagged 1 month.

Table #4 Producer price indexes for the net output of major industry groups