December 1995 Producer Price Index

Historical release narrative reproduced from the official public-domain source. Statistical tables, standard technical appendices, administrative material and attendance rosters are omitted; formatting is adapted for reading. Figures retain the release's historical context and may have been revised. Consult the linked source for the complete document.

The Producer Price Index for Finished Goods increased 0.5 percent in December on a seasonally adjusted basis, the Bureau of Labor Statistics of the U. S. Department of Labor reported today. This index also rose 0.5 percent in November after edging down 0.1 percent in October. Prices received by domestic producers of intermediate goods moved up 0.2 percent in December after showing no change in the previous month. Crude material prices declined 0.2 percent following a 1.6 percent advance in November. (See table A.)

Among finished goods in December, the index for energy goods turned up 3.3 percent following a 0.5 percent decrease a month earlier. Price increases for finished consumer foods slowed from 1.2 percent in November to 0.1 percent in December. Prices for finished goods other than foods and energy increased 0.1 percent, following an advance of 0.4 percent in November.

Change in Except finished Inter- goods foods from 12 mediateCrude and months Month Total Foods Energy energy ago goods goods (unadj.) 1994 Dec. 0.3 1.3 -0.9 0.2 1.7 0.4 0.5

may differ from those previously reported because indexes for August 1995 have been recalculated to incorporate late reports and corrections by respondents. All indexes are subject to revision 4 months after original publication.

Before seasonal adjustment, the Producer Price Index for finished goods increased 0.3 percent in December to 129.0 (1982=100). From December 1994 to December 1995, the Finished Goods Price Index rose 2.2 percent after increasing 1.7 percent in calendar-year 1994. The finished energy goods index moved up 0.9 percent in 1995 after a rise of 3.5 percent the year before. Prices for finished consumer foods advanced 1.9 percent in 1995 after increasing 1.1 percent in 1994. The index for finished goods other than foods and energy rose 2.5 percent in 1995 following a 1.6 percent rise a year earlier. The majority of this acceleration can be attributed to sanitary paper products, alcoholic beverages, and tobacco products. At the earlier stages of processing, prices received by domestic producers of intermediate goods increased 3.3 percent after advancing 4.4 percent in 1994. The index for crude materials turned up 4.1 percent in 1995 after dipping 0.5 percent in the previous year.

Finished goods

The Producer Price Index for finished energy goods advanced 3.3 percent in December, seasonally adjusted, following 6 consecutive months of decline. Gasoline prices increased 11.8 percent in December after falling 3.8 percent in November. In December, prices also turned up after decreasing a month earlier for residential natural gas. Price increases for home heating oil accelerated from 7.3 percent in November to 11.0 percent in December. By contrast, prices turned down after increasing in the previous month for residential electric power.

Prices for finished consumer foods edged up 0.1 percent in December, following a 1.2 percent advance in November. The December slowdown in price increases was led by a downturn in prices for finfish and shellfish, beef and veal, and for fresh fruits and melons, all of which had increased in November. Price increases slowed markedly from November to December for eggs for fresh use, dairy products, processed young chickens, and roasted coffee. By contrast, prices turned up after falling a month earlier for fresh and dry vegetables and pork. Prices rose more rapidly than in the previous month for confectionery end products. The indexes for soft drinks, processed turkeys, milled rice, and for shortening and cooking oils all fell much less in December than in November.

The index for consumer goods other than foods and energy inched up 0.1 percent in December, following a 0.4 percent advance in November. From December 1994 to December 1995, this index increased 2.7 percent after rising 1.4 percent in the previous year. In December, price increases for passenger cars slowed to 0.2 percent from 1.3 percent in November. Prices also rose less than a month earlier for light trucks, prescription drugs, books, newspapers, and for lawn and garden equipment. Indexes turned down after rising in the previous month for cosmetics, household appliances, periodicals, soaps and detergents, and for tires and tubes. By contrast, prices turned up after falling in November for women's apparel and household glassware. The indexes for sanitary papers and health products and for mobile homes rose more rapidly in December than a month earlier. Prices continued to rise modestly for over-the-counter drugs.

The capital equipment index edged up 0.1 percent in December, following a 0.4 percent advance in November. Prices for capital goods were 2.2 percent higher in December 1995 than a year earlier, compared with a 2.0 percent increase in 1994. In December, price increases for light trucks slowed from 1.6 percent in November to 0.8 percent; prices also rose less than in the previous month for agricultural machinery and equipment, paper industries machinery, pumps and compressors, railroad equipment, and textile machinery. Price indexes declined more in December than a month earlier for heavy trucks and electronic computers. Prices turned down after rising in November for communication equipment, tools and dies, transformers, mining machinery, and metal forming machine tools. By contrast, price increases accelerated for civilian aircraft. Prices turned up after moving down in November for construction machinery and metal cutting machine tools.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components increased 0.2 percent, seasonally adjusted, after remaining unchanged in the previous month. The index for energy goods rose more than a month earlier. By contrast, the index for foods and feeds rose less than in November, and prices for both nondurable and durable manufacturing materials fell more than a month ago. In addition, the index for construction materials fell the same as in November. Excluding food and energy prices, the index for intermediate materials declined 0.4 percent after falling 0.2 percent a month earlier. (See table B.)

The index for intermediate energy goods increased 2.7 percent in December after rising 1.1 percent a month earlier. From December 1994 to December 1995, this index increased 1.1 percent, about a third of its rise in 1994. The December increase was led by the index for gasoline which turned up 11.8 percent after falling 3.8 percent in the previous month. Prices for both jet and diesel fuels rose more than in November. Conversely, the index for industrial electric power declined 0.2 percent after rising 1.1 percent a month earlier. Prices for commercial electric power also turned down after rising in the prior month. Indexes for natural gas to electric utilities and both commercial and industrial natural gas rose less than a month ago.

The advance in the index for intermediate foods and feeds slowed to 1.2 percent from 2.4 percent in the previous month. December was the seventh consecutive monthly increase for this index. After falling 4.5 percent in 1994, this index turned up 10.3 percent in 1995. The December deceleration was led by the prepared animal feeds index which rose 3.6 percent after increasing 5.3 percent in November. Prices for liquid milk products also rose less than a month earlier. Indexes for beef and veal, confectionery materials, and butter turned down after rising in the prior month. The index for pork, however, turned up 2.3 percent after falling 1.3 percent a month ago. Prices for crude vegetable oils fell less than in

November. In addition, indexes for dry milk products and refined sugar rose more than in the prior month.

The index for nondurable manufacturing materials fell 1.0 percent after decreasing 0.9 percent in November. This index increased 5.8 percent in 1995 following a 10.4 percent advance in 1994. In December, price declines for intermediate basic organic chemicals, leather, paperboard, woodpulp, and primary basic organic chemicals, outweighed increases for fertilizer materials, miscellaneous inorganic chemicals, and synthetic fibers.

The index for durable manufacturing materials fell 0.7 percent after decreasing 0.6 percent in November. This index advanced 1.0 percent from December 1994 to December 1995 following an increase of 9.8 percent in calendar year 1994. In December, prices for plywood, building paper and board, aluminum, and silver fell, while prices increased for copper and brass mill shapes, lead, zinc, and gold.

The index for construction materials fell 0.3 percent for the third consecutive month. Over the year, these prices moved up 1.9 percent after rising 3.9 percent in 1994. In December, price declines for softwood lumber, plywood, millwork, and plastic construction products more than offset increases for air conditioning and refrigeration equipment, wiring devices, plumbing fixtures and brass fittings, non-fluid power metal valves, and cement.

Crude goods

The Producer Price Index for Crude Materials declined 0.2 percent in December, after rising 1.6 percent in November. Prices for foods and feeds declined after rising a month earlier. Prices for crude energy materials, however, increased slighty less than in the prior month, and the basic industrial materials index declined less than it had in the previous month. (See table B.)

After rising 3.6 percent in November, the index for foods and feeds declined 0.9 percent in December. From December 1994 to December 1995, this index increased 12.9 percent, after declining 9.4 percent in 1994. In December, prices for slaughter cattle turned down 3.2 percent after rising 3.0 percent a month earlier. Indexes for slaughter broilers, unprocessed finfish, slaughter turkeys, and corn turned down after rising in the previous month. By contrast, prices for slaughter hogs turned up 8.0 percent in December after a 9.1 percent decline a month earlier. Indexes for hay and for fresh and dry vegetables turned up after falling in November.

The rise in the crude energy materials index was 1.5 percent in December, about the same as a month earlier. This index remained virtually unchanged for the second consecutive year. In December, price increases for crude petroleum and coal outweighed a decline for natural gas to pipelines.

The crude nonfood materials less energy index fell 1.1 percent in December after declining 2.1 percent in the prior month. December was the sixth consecutive monthly decline. This index fell 4.6 percent from December 1994 to December 1995 after rising 17.3 percent in the prior year. In December, the index for iron and steel scrap fell 0.3 percent after a 4.4 percent decline in November. Price decreases for wastepaper, cattle hides and aluminum base scrap also slowed from a month ago. By contrast, prices for raw cotton and silver ores turned down after increasing in November. The copper base scrap index fell more than it had in the previous month. In addition, the index for copper ores rose less than it had a month earlier.

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

Mining. The Producer Price Index for the net output of total domestic mining industries increased 1.3 percent in December after rising 2.0 percent in November. (Net output price indexes are not seasonally adjusted.) In December, prices for the oil and gas extraction industry group moved up 1.7 percent following a 3.6 percent advance in the preceding month. Price indexes turned down after increasing a month earlier for the metal mining and anthracite mining industry groups. However, prices turned up after falling in November for the bituminous coal and lignite mining and for the nonmetallic minerals mining industry groups.

After falling 2.6 percent in 1994, the Producer Price Index for total mining decreased 0.8 percent in 1995, chiefly reflecting lower prices for oil and gas extraction and for nonmetallic mineral mining. In December 1995, the index for total domestic mining stood at 71.4 (December 1984=100).

Manufacturing. The Producer Price Index for total domestic manufacturing industries increased 0.2 percent in December, the same as in November. Prices for the petroleum refining industry group turned up 3.3 percent after 2 months of decline. Among other domestic manufacturing industries in December, modest increases were registered for the industry groups for food and kindred products, textile mill products, furniture and fixtures, printing and publishing, and measuring instruments. Prices declined for the industry groups for lumber and wood products, paper and allied products, rubber and plastic products, and primary metal industries.

The index for the net output of the domestic manufacturing sector stood at 125.3 in December, 3.0 percent higher than its level of a year earlier. In 1994, this index increased 2.4 percent. In 1995, all categories increased in price except for lumber and wood products, which moved down 2.6 percent. The largest increase (13.1 percent) was for the paper and allied products industry group. The next larger increases were for the industry groups for printing and publishing (6.8 percent) and chemicals and allied products (5.7 percent). Increases for the other industry groups were all less than 3.5 percent in 1995.

Other. Among other industries in December, the largest declines were for wastepaper collection, travel agencies, medical laboratories, water transportation of freight not elsewhere classified, and metal scrap collection. Increases occurred for natural gas utilities, deep sea domestic transportation of freight, and freight transportation arrangement.

Over the year, the largest decreases were in the indexes for waste paper collection (51.7 percent), travel agencies (8.3 percent), and metal scrap collection (6.9 percent). Advances were registered for scheduled air transportation (10.7 percent), local trucking with storage (10.7 percent), United States Postal Service (10.4 percent), water transportation of freight not elsewhere classified (8.9 percent), and passenger car rental (7.9 percent).

Producer Price Index data for January 1996 are scheduled for release on Tuesday, February 27, at 8:30 a.m. (E.S.T.)

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.

PPI Weights to be Updated

The Bureau of Labor Statistics will soon update the value weights used to calculate Producer Price Indexes to more accurately reflect recent production and marketing patterns. The new weights, which will be introduced next month when January 1996 index data are released, will be based on shipment values from the year 1992. These value weights come from the Census of Manufactures, the Census of Mining, the Census of Services, and the Census of Agriculture. PPI weights have been based upon 1987 census shipment values since January 1992.

All indexes will be affected by this weight update, including all the industry net output indexes, as well as those calculated from traditional commodity groupings. In addition, weights will be updated from the 1987 to the 1992 census for all stage-of-processing indexes, net output of industry by stage of process indexes, durability of product indexes, and special commodity-grouping indexes. This weight revision will not change the arithmetic reference base, in most cases 1982=100, of the PPI index system.

Also with the publication of January data next month, SIC-classified indexes will reflect updated input/output (I/O) ratios based on the 1987 Input-Output Account of the Bureau of Economic Analysis (BEA). These I/O ratios, which represent the proportion of each industry's output consumed outside the industry, will be updated from those reflected in BEA's 1977 Input-Output Account. The commodity grouping indexes will not be affected.

It is important to note that the PPI classification system and aggregation structure will not change as a result of the weight revisions discussed above. The weight update, however, will result in significant shifts in the relative importance of various industries and products, and these shifts will impact future aggregate indexes in a manner commensurate with the relative gains and losses in value weights from 1987 to 1992.

Relative importances as of December 1995 on the 1987 and 1992 weighting schemes will be available on February 23, 1996. To request this information call the Division of Industrial Prices and Price Indexes, Section of Index Analysis at 202-606-7705.

Recalculated Seasonal Adjustment Factors to be Available on February 23, 1996

Each year with the release of the January PPI, seasonal adjustment factors are recalculated to reflect price movements from the just-completed calendar year. This routine annual recalculation may result in revisions to seasonally adjusted indexes for the previous 5 years. The recalculated seasonal adjustment factors customarily have been available around the time of the release of the January data in February. This year, the following information will be available on February 23, 2 work days prior to the release of PPI data for January 1996 on February 27:

-1996 factors for seasonally adjusted commodity indexes. -A table of changes of seasonal status of commodity indexes. -Recalculated seasonal factors for the last 5 years (1991-1995) for

Stage-of-Processing indexes. -For the overall and less food and energy finished goods, intermediate materials, and crude materials indexes, a table containing the following information for the previous 2 years (1994 and 1995): -Former and revised seasonally adjusted indexes, -Former and revised seasonally adjusted percent changes, -Former and recalculated seasonal factors.

To request any of this information, call the Division of Industrial Prices and Price Indexes, Section of Index Analysis at 202-606-7705.

Effect of Government Shutdown on December 1995 PPI Data

Collection and processing of December Producer Price Index data were interrupted because the Bureau of Labor Statistics was shutdown for parts of December and January due to a lapse in funding. The December PPI data collection forms were mailed to respondents prior to the shutdown. Respondents completed the forms, reporting their prices as of December 12, and mailed them back to the Bureau during the shutdown. Processing of the collected data commenced after the shutdown, which was extended by a weather-related closing. The delay in the processing of the data resulted in BLS receiving a slightly higher than normal percentage of returned survey forms, enhancing the sampling reliability of the December PPI.

The shutdown also delayed the mailing of January data collection forms until January 19, which was after the scheduled January 9 pricing date. This created the possibility that respondents might report price changes for January that should be included in the February PPI. To lessen this possibility, a note reminding respondents to report prices as of January 9 was included with the survey forms. The processing period for January forms has been shortened to minimize the delay in the January release, originally scheduled for February 13, now scheduled for February 27. BLS will make every effort to assess the possible impact on January PPI release of the late mailing of data collection forms and advise users accordingly.

The delayed collection and processing of January data due to the shutdown will result in a slight delay in the collection of February data. However, the delay is expected to have no appreciable effect on February PPI data, which will be released as originally scheduled on March 14.