December 1994 Producer Price Index

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The Producer Price Index for Finished Goods moved up 0.2 percent in December, seasonally adjusted, the Bureau of Labor Statistics of the U. S. Department of Labor reported today. This index increased 0.5 percent in November following declines in both October and September. Prices received by domestic producers of intermediate goods rose 0.3 percent in December after advancing 1.1 percent in the previous month. Crude material prices increased 0.3 percent after a 1.0 percent rise in November. (See table A.)

Among finished goods in December, the index for energy goods turned down 1.5 percent following a 2.1 percent rise a month earlier. Price increases for finished consumer foods accelerated from 0.2 percent in November to 1.6 percent in December. Prices for finished goods other than foods and energy rose 0.2 percent, following a rise of 0.1 percent in November.

Change in Except finished Inter- goods foods from 12 mediateCrude and months Month Total Foods Energy energy ago goods goods (unadj.) 1993 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 inched up 0.1 percent in December to 126.2 (1982 = 100). From December 1993 to December 1994, the Finished Goods Price Index rose 1.7 percent after registering a 0.2 percent rise in calendar year 1993. The finished energy goods index turned up 3.4 percent in 1994 after a decline of 4.1 percent the year before. Prices for finished consumer foods moved up 1.0 percent in 1994 after increasing 2.4 percent in 1993. The index for finished goods other than foods and energy rose 1.6 percent in 1994 following a 0.4 percent rise a year earlier. At the earlier stages of processing, prices received by domestic producers of intermediate goods advanced 4.4 percent after 2 consecutive yearly increases of 1.0 percent. The Crude Goods Price Index turned down 1.1 percent in 1994 after showing virtually no change in 1993.

Finished goods

The Producer Price Index for finished energy goods fell 1.5 percent in December, seasonally adjusted. This followed a November increase of 2.1 percent. Gasoline prices were down 4.5 percent in December, after rising as much in November. (See special note at the end of the release regarding quality adjustment for gasoline.) In December, prices also turned down after rising a month earlier for residential electric power. Prices for residential natural gas continued to move down. By contrast, home heating oil prices turned up 2.1 percent after falling 0.9 percent in the previous month.

The index for consumer goods other than foods and energy inched up 0.1 percent in December, following a 0.2 percent increase in November. From December 1993 to December 1994, this index turned up 1.4 percent after falling 0.4 percent a year earlier. In December, advances were registered within this grouping for passenger cars, mobile homes, household flatware, women's apparel, alcoholic beverages, light trucks, and cosmetics. Prices declined, however, for tobacco products and for tires and tubes.

The capital equipment index moved up 0.4 percent in December after inching up 0.1 percent in November. Prices for capital goods were 2.0 percent higher in December 1994 than a year earlier, slightly larger than the 1.8 percent increase in 1993. In December, prices turned up after falling in November for light motor trucks, heavy motor trucks, electronic computers, and agricultural machinery. Prices rose more rapidly in December than in November for truck trailers. By contrast, prices turned down after rising a month earlier for communication equipment, civilian aircraft, and metal cutting machine tools. Price increases slowed for commercial furniture. Prices for metal forming machine tools were unchanged after increasing in the previous month.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components increased 0.3 percent seasonally adjusted in December, after rising 1.1 percent in November. When food and energy prices are excluded, this index increased 0.6 percent in December, following a 0.9 percent advance in November. Prices for intermediate energy materials as well as for foods and feeds turned down after rising in November. Indexes for both durable manufacturing and construction materials rose less than a month earlier. In addition, the index for nondurable manufacturing materials rose more than in November. (See table B.)

The index for durable manufacturing materials increased 1.4 percent after rising 1.7 percent a month earlier. From December 1993 to December 1994, this index increased 9.8 percent, almost 4 times its increase in 1993. The December rise was led by higher prices for aluminum mill shapes, primary aluminum, primary copper, and copper and brass mill shapes. However, prices declined for silver, zinc, gold, and flat glass.

The rise in the Producer Price Index for nondurable manufacturing materials accelerated to 1.2 percent in December from 0.8 percent the month before. After edging down 0.6 percent in 1993, this index turned up 10.5 percent in 1994. The December rise was led by the primary basic organic chemicals index which rose 5.0 percent after increasing 0.4 percent in November. Prices for inedible fats and oils and basic inorganic chemicals also rose more than in the prior month. Indexes for woodpulp, paint materials, and synthetic fibers turned up after falling on November. The index for paperboard, however, remained unchanged after rising 3.7 percent a month earlier, and miscellaneous basic organic chemical prices rose less than in November. The index for materials and components for construction moved up 0.3 percent in December after a November increase of 0.9 percent. This index increased 3.9 percent in 1994 following a 5.0 percent advance in 1993. In December, the softwood lumber index decreased 3.1 percent after rising 2.1 percent a month earlier. Indexes for plywood, non-fluid power valves, and for plumbing fixtures and brass fittings also turned down after increasing in November. Prices for fabricated structural metal products, concrete products, nonferrous wire and cable, and wiring devices all rose less than in the previous month. In addition, the index for millwork remained unchanged after rising a month earlier. Prices for gypsum products, however, turned up 2.5 percent after declining 2.0 percent in November.

The index for intermediate energy goods turned down 0.9 percent in December after rising 2.8 percent in November. This index advanced 3.0 percent from December 1993 to December 1994 following a decline of 4.2 percent in calendar year 1993. In December, the gasoline index fell 4.5 percent after increasing the same amount a month earlier. Prices for diesel fuel, industrial electric power, and natural gas to electric utilities also turned down after rising in November. In addition, price increases slowed from November to December for commercial electric power, commercial and industrial natural gas, and liquefied petroleum. In contrast, prices for residual fuel turned up 3.3 percent after falling 1.8 percent a month earlier.

Prices for intermediate foods and feeds registered a 1.0 percent decline in December, following a 0.3 percent November advance. Over the year, these prices moved down 4.5 percent after rising 5.5 percent in 1993. In December, the index for crude vegetable oils turned down 1.7 percent after rising 7.7 percent a month earlier. Prices for beef and veal, fluid milk products, miscellaneous beverage materials, and liquid milk products also fell after increasing in November. In contrast, the decline in the prepared animal feeds index slowed to 1.1 percent from 2.6 percent a month earlier. In addition, prices for both flour and pork turned up after falling a month earlier.

Crude goods

The Producer Price Index for Crude Materials for Further Processing moved up 0.3 percent in December after rising 1.0 percent in November. The index for crude energy materials fell more than in November, and prices for both basic industrial materials and crude foodstuffs and feedstuffs rose less than in the prior month. (See table B.)

The index for crude energy materials declined 2.3 percent in December, the third decline in this index over the last 4 months. This index fell 1.9 percent from December 1993 to December 1994 after declining 12.3

percent a year earlier. In December, bituminous coal prices fell 6.6 percent after rising 2.3 percent in November. The index for crude petroleum fell more than it had a month earlier. By contrast, the natural gas to pipelines index turned up 2.3 percent after decreasing 3.6 percent a month earlier.

The rise in the crude nonfood materials less energy index slowed to 2.5 percent from 3.4 percent in November. The aluminum base scrap index rose 3.5 percent after increasing 15.5 percent a month ago. Prices for both iron and steel scrap and copper base scrap also rose less than in November. In addition, the index for miscellaneous roundwood products turned down after rising a month earlier, and cattle hide prices fell for the second consecutive month. By contrast, the rise in the softwood logs, bolts, and timber index accelerated to 0.8 percent from 0.1 percent in November. Prices for copper ores and raw cotton also rose more than in the previous month. In addition, the construction sand and gravel index turned up after falling in November. The basic industrial materials index rose 17.0 percent from December 1993 to December 1994, compared with a 10.7 percent increase in 1993. Some of the more substantial 1994 increases within this grouping included wastepaper (171.6 percent), aluminum base scrap (85.5 percent), copper base scrap (52.3 percent), raw cotton (34.9 percent), and cattle hides (21.7 percent). Softwood log prices, however, fell 15 percent. The crude foodstuffs and feedstuffs index rose 1.1 percent in December after increasing 1.5 percent in November. This index fell 9.3 percent in 1994, after rising 7.2 percent in 1993. The December slaughter cattle index turned down 1.6 percent following a 6.5 percent rise in November. Prices for soybeans also fell after increasing a month earlier. The slaughter hogs index, however, turned up 14.5 percent after falling over 10 percent in November. Prices for fresh vegetables except potatoes more than doubled in December, following a decline in November. Prices for slaughter broilers and fluid milk also turned up after falling a month ago. In addition, the corn index rose more than it had in the previous month.

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

Mining. The Producer Price Index for the net output of total domestic mining industries fell 0.8 percent for the second consecutive month. (Net output price indexes are not seasonally adjusted.) In December, prices for the bituminous coal and lignite mining industry group declined 7.2 percent after rising 2.6 percent a month earlier. Prices continued to rise rapidly for the metal mining industry group. The oil and gas extraction industry group index, however, turned up somewhat after falling in November.

After falling 7.9 percent in 1993, the Producer Price Index for total mining moved down 2.6 percent in 1994, chiefly reflecting lower prices for oil and gas extraction and for nonmetallic mineral mining. The index for total domestic mining stood at a level of 70.8 (December 1984 = 100).

Manufacturing. The Producer Price Index for total domestic manufacturing industries moved down 0.2 percent in December after increasing 0.4 percent in November. Prices for the petroleum refining industry group fell 5.7 percent after increasing 2.8 percent in the previous month. Prices for foods and kindred products moved down after showing no change a month earlier. Prices for the rubber and plastic products industry group were unchanged after rising in November. Price increases slowed somewhat for the industry groups for paper and allied products and for primary metal industries. The index for the tobacco manufactures industry group was unchanged after inching up in November. By contrast, prices turned up somewhat after decreasing in November for the industry group for transportation equipment. Price increases accelerated for the printing and publishing industry group. Prices for the chemicals and allied products industry group rose 1 percent or more in 3 of the last 4 months.

The index for the net output of the domestic manufacturing sector stood at 121.7 in December, 2.4 percent higher than its level of a year earlier. In 1993, this index increased 0.8 percent. In 1994, all categories increased in price except for food and kindred products, which moved down 0.3 percent. The over-the-year advances for three industries were more than 9 percent: Paper and allied products; petroleum refining; and primary metal industries. Prices for the chemicals and allied products industry group rose 7.4 percent in 1994.

Other. Among other industries, prices for waste paper collection increased over 6 percent for the second consecutive month. Prices turned up after falling a month earlier for water transportation of freight, n.e.c. and for refined petroleum pipe lines. Prices rose more than in November for deep sea domestic transportation of freight and ferrous metal scrap collection. Prices for electric utilities were unchanged after falling last month. By contrast, prices turned down after rising in November for passenger car rental. Prices for hotels and motels also turned down, but after showing no change a month earlier. Price increases slowed for crude petroleum pipelines, nonferrous metal scrap collection, natural gas utilities, crude petroleum pipe lines, and for truck rental and leasing.

Over the year, the largest increases were in the indexes for waste paper collection (33.7 percent), metal scrap collection (21.9 percent), Mississippi River transportation (19.4 percent), water transportation of freight, n.e.c. (16.5 percent), and crude petroleum pipelines (13.7 percent). Prices for natural gas utilities declined 3.5 percent.

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: 1-800-326-2577.

New seasonal adjustment method to be implemented Effective with the release of PPI data for January 1995 on February 10, a new methodology will be used to calculate seasonally adjusted data. BLS will switch from the Bureau of the Census' X-11 program to a new system for calculating its Commodity and Stage-of-Processing indexes. Central to this change will be the use of Statistics Canada's X-11ARIMA/88 software (Dagum 1988) for seasonal adjustment. This methodology for seasonal adjustment incorporates a number of technical enhancements that improve the estimate of seasonal factors. To receive a summary report on the new methodology, please contact our Branch of Information and Analysis at 202-606-7705.

Quality adjustment for gasoline

A quality adjustment has been made to gasoline prices in the December PPI to account for the effects of the mandated introduction of reformulated gasoline in certain areas of the United States. It is estimated that the adjustment accounted for approximately 1.2 percentage points of the 4.5 percent decline in the gasoline index for December. For more details, see "Quality Adjustment for Changes to Gasoline Resulting from the Clean Air Act Amendment of 1990" in the December 1994 issue of our monthly detailed report, Producer Price Indexes. To receive an advance copy of this article, 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 Aug. 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 August 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 Aug. 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