October 1997 Producer Price Index

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The Producer Price Index for Finished Goods increased 0.1 percent in October, seasonally adjusted, the Bureau of Labor Statistics of the U. S. Department of Labor reported today. This followed a rise of 0.5 percent in September. Prices for finished goods other than foods and energy showed no change in October after increasing 0.4 percent a month ago. Prices received by domestic producers of intermediate goods fell 0.1 percent in October after increasing 0.3 percent in the previous month. The index for crude materials rose 4.0 percent after increasing 0.6 percent in September. (See table A.)

Change in Except Finished Inter- goods foods from 12 mediateCrude and months Month Total Foods Energy energy ago Goods goods (unadj.) 1996 Oct. 0.4 0.8 1.7 -0.1 3.1 -0.2 -0.7 Nov. 0.2 0 0.9 0 3.0 -0.2 2.7 Dec. 0.5 -0.2 3.3 0.1 2.8 0.5 6.2

The October increase in the index for finished goods was led by a 0.4- percent rise for finished consumer foods. Prices for both finished energy goods and for consumer goods other than foods and energy inched up 0.1 percent in October. Partially offsetting these increases were prices for capital equipment, which fell slightly in October.

For the first 10 months of 1997, the Producer Price Index for Finished Goods declined at a 1.2-percent seasonally adjusted annual rate (SAAR). This compares with a 2.8-percent increase during all of 1996. Prices for finished goods other than foods and energy increased at a 0.3-percent SAAR for the first 10 months of 1997 after rising 0.6 percent in the prior year.

Before seasonal adjustment, the Producer Price Index for Finished Goods increased 0.5 percent in October to stand at 132.4 (1982=100). From October 1996 to October 1997, the finished goods index decreased 0.2 percent. During this same period, prices for finished energy goods fell 1.5 percent, consumer foods prices declined 1.2 percent, and prices for finished goods other than foods and energy rose 0.3 percent. Prices received by domestic producers of intermediate goods moved down 0.4 percent during the 12 months ended in October 1997, and crude materials prices increased 0.3 percent over the same period.

Finished goods

The Producer Price Index for Finished Consumer Foods increased 0.4 percent, seasonally adjusted, following a 0.1-percent gain in September. Prices for fresh and dry vegetables turned up 16.8 percent in October after falling 5.1 percent in the previous month. The indexes for dairy products and for finfish and shellfish rose more than in the prior month. Prices for shortening and cooking oils rose after falling in September. By contrast, the index for eggs for fresh use turned down 10.0 percent after rising 13.8 percent a month ago. Prices for fresh fruits and melons rose less than in the previous month. The indexes for roasted coffee, pork, and for beef and veal fell more than in September.

The index for finished consumer goods other than foods and energy rose 0.1 percent in October. A 0.7-percent increase in prices for passenger cars was a key factor behind this month's advance. (In accordance with our usual practice, most new model year passenger cars and light trucks were introduced into the PPI in October. See "Report on Quality Changes for 1998 Model Vehicles.") Price increases for prescription drugs and book publishing also contributed to October's increase. The small rise in the index for consumer goods less foods and energy follows a 0.5-percent increase in September. This deceleration can be traced to prices for tobacco products, which showed no change in October after rising 3.2 percent in the previous month. The price increase for passenger cars was smaller than in September, and the index for light trucks turned down after rising a month ago.

The index for finished energy goods rose 0.1 percent in October. Rising prices for residential natural gas and residential electric power were the most important factors in the increase. The advance in energy prices in October was less than the 1.5-percent rise a month ago. This deceleration was primarily due to the index for gasoline, which fell 3.6 percent in October following a 2.2-percent advance in September.

The index for capital equipment turned down 0.1 percent in October after rising 0.3 percent in September. This deceleration was led by a downturn of 0.7 percent in prices for light motor trucks. The indexes for heavy trucks and civilian aircraft also fell after rising in the prior month.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components decreased 0.1 percent in October, seasonally adjusted. This decline was led by a 2.8-percent drop in the index for intermediate foods and feeds. Prices for materials for durable manufacturing fell 0.4 percent, and the index for construction materials declined 0.2 percent. Prices for materials for nondurable manufacturing showed no change. By contrast, the index for energy goods rose 0.5 percent.

October's 0.1-percent drop in prices for intermediate goods follows a 0.3-percent gain in the prior month. The index for intermediate foods and feeds, which fell after advancing a month ago, contributed to this downturn. Price increases for intermediate energy goods slowed from 1.4 percent in September to 0.5 percent in October. In addition, the index for nondurable manufacturing materials was unchanged after increasing in September. Prices for durable manufacturing materials declined following no change in the previous month. The index for construction materials fell more in October than in September. (See table B.)

The index for intermediate foods and feeds fell 2.8 percent in October. A 6.4-percent decrease in prices for prepared animal feeds led the decline. Also contributing were lower prices for confectionery materials and pork. October's 2.8-percent decrease for intermediate foods and feeds follows a 1.4-percent rise one month ago. The downturn is mostly explained by the index for prepared animal feeds, which fell 6.4 percent after increasing 2.8 percent in the prior month. Prices for confectionery materials, flour, natural and processed cheese, and refined sugar also declined after rising in the previous month. Pork prices fell more than in September.

The index for intermediate energy goods rose 0.5 percent in October. This advance was led by increases for both utility natural gas and liquefied petroleum gas. October's 0.5-percent rise in prices for intermediate energy goods follows a 1.4-percent advance in September. The slowdown was led by the index for commercial electric power, which increased 0.2 percent after rising 2.3 percent a month ago. Prices for gasoline fell 3.6 percent after rising 2.2 percent in the previous month. By contrast, the indexes for No. 2 diesel fuel and jet fuels turned up after falling in September.

The index for materials for nondurable manufacturing was unchanged in October. Increases for plastic resins, and inedible fats and oils, were offset by decreases for primary basic organic chemicals and fertilizer materials. Comparing the past two months, the stable October index for nondurable materials follows a 0.4-percent increase in September. This deceleration was led by smaller price increases for paperboard, which rose 0.3 percent after gaining 4.3 percent a month ago. Prices for primary basic organic chemicals, fertilizer materials, industrial chemicals, and lubricating oil base stocks turned down following increases in September. By contrast, the index for plastic resins and materials turned up after falling in the prior month.

The index for materials for durable manufacturing fell 0.4 percent in October following no change in September. Prices for aluminum mill shapes fell 0.7 percent after increasing 1.8 percent in the prior month. The indexes for plywood and primary aluminum ingot turned down after rising a month ago. Prices for steel mill products showed no change after increasing in September. By contrast, the index for copper and brass mill shapes turned up 0.1 percent after dropping 2.7 percent in the prior month. Prices for flat glass and gold also rose after falling in September.

The index for materials and components for construction moved down 0.2 percent in October following a 0.1-percent decline a month ago. Price decreases for plywood, softwood lumber, millwork, nonferrous wire and cable, and for air conditioning and refrigeration equipment outweighed price increases for fabricated structural metal products and gypsum products.

Crude goods

The Producer Price Index for Crude Materials for Further Processing advanced 4.0 percent in October, seasonally adjusted. This rise can be traced primarily to increasing prices for crude energy goods. The index for basic industrial materials also rose, while prices for crude foodstuffs and feedstuffs showed no change. The October advance for crude materials for further processing follows a smaller 0.6-percent advance in September. Key to this acceleration was a faster rate of increase for crude energy materials. Prices for basic industrial materials also rose after falling last month. The index for crude foodstuffs and feedstuffs remained unchanged in October after declining in the previous month. (See table B.)

The index for crude energy materials increased 10.7 percent in October. Leading this advance was a 17.5-percent rise in natural gas prices. The index for crude petroleum also rose this month. The October increase in crude energy materials follows a 2.6-percent rise in September. The index for natural gas , which rose 17.5 percent following a 7.4-percent advance one month ago, contributed most to this acceleration. Crude petroleum prices increased after falling in the prior month. By contrast, the index for coal declined 0.6 percent following a 0.6-percent advance in the previous month.

The index for basic industrial materials increased 0.3 percent in October. Leading this advance was a 5.7-percent rise in prices for aluminum base scrap. Rising prices for iron and steel scrap and leaf tobacco also contributed to the rise. The October increase in basic industrial materials follows a 1.0-percent decrease in September. A key factor in this upturn was a 2.7-percent advance in prices for copper ores following a 10.9-percent decline one month ago. Prices for aluminum base scrap, iron and steel scrap, gold ores, cattle hides, and raw cotton also turned up after falling in the previous month. By contrast, the index for leaf tobacco advanced 4.0 percent following a 10.2-percent advance in September. Prices for softwood logs, bolts, and timber; copper base scrap; and wastepaper fell more this month than last month.

The index for crude foodstuffs and feedstuffs remained unchanged in October. Increasing prices for corn, fluid milk, unprocessed shellfish, soybeans, fresh and dry vegetables, and fresh fruits and melons were offset by decreasing prices for slaughter broilers and fryers, slaughter hogs, and slaughter turkeys. October's unchanged index for crude foodstuffs and feedstuffs follows a 0.3-percent decline in September. The index for soybeans, which rose 4.1 percent following a 4.3-percent decline one month ago, was key to this acceleration. Prices for fluid milk, fresh and dry vegetables, Louisiana rough rice, and slaughter cattle advanced after falling last month. The index for unprocessed shellfish 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 total domestic mining industries advanced 8.2 percent in October following a 2.0-percent increase in September. (Net output price indexes are not seasonally adjusted.) In October, prices for the oil and gas extraction industry group turned up 11.1 percent after a 2.9 percent rise in the previous month. The index for the metal mining industry group advanced 1.2 percent, following a 3.2 percent decrease one month ago. Prices for the nonmetallic minerals mining industry group rose 0.2 percent following a 0.1-percent decline in the prior month. Conversely, the index for the coal mining industry group fell 0.2 percent following a 0.2-percent increase in the previous month. In October, the Producer Price Index for total domestic mining industries stood at 88.7 (December 1984=100), 6.9 percent above its year-ago level.

Manufacturing. The Producer Price Index for the net output of total domestic manufacturing industries rose 0.3 percent in October after showing no change in September. In October, prices for the transportation equipment industry group rose 2.7 percent following a 0.8-percent decrease in the prior month. The index for nonmetallic mineral products also rose after falling in September. Prices for chemicals and allied products, fabricated metal products, machinery (except electrical), and miscellaneous manufactures industry groups advanced after showing no change in September. The index for the printing and publishing industry group rose more than in the previous month. On the other hand, prices for tobacco manufactures showed no change after rising in the previous month. The indexes for food and kindred products and lumber and wood products industry groups fell more than a month ago. Prices for the apparel, furniture and fixtures, leather and leather products, primary metal industries, and electrical and electronic machinery industry groups turned down after increasing in the prior month. In October, the Producer Price Index for the net output of the total domestic manufacturing sector stood at 127.7 (December 1984=100), 0.4 percent below its year-ago level.

Other. Among other industries in October, the indexes for scheduled air transportation, freight transportation arrangement, radio broadcasting, cable and other pay television services, and passenger car rental (without drivers) advanced following declines one month ago. Prices for truck rental and leasing (without drivers), nonscheduled air transportation, and psychiatric hospitals rose after showing no change in the prior month. The indexes for water transportation of freight (not elsewhere classified), skilled and intermediate care facilities, and legal services increased more than in the previous month. Prices for scrap and waste materials fell less than one month earlier.

By contrast, prices for railroads (line haul operating), airports and airport services, travel agencies, and general medical and surgical hospitals declined following advances one month ago. Prices for deep sea foreign transportation of freight and marine cargo handling fell more than last month. The indexes for local trucking with storage, farm product warehousing and storage, and specialty hospitals, except psychiatric, showed no change following advances in September. Prices for hotels and motels rose less than in the prior month.

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 Commodity Weight Allocations to Stage-of-Processing Indexes to be Updated

Effective with the release of January 1998 data on February 18, 1998, the Bureau of Labor Statistics will update the weight allocations used to calculate the stage-of-processing (SOP) indexes, found in table 1 of the press release and of the PPI Detailed Report, to more accurately reflect recent marketing patterns. While PPI weights will continue to be based on shipment values from the 1992 economic census, the proportion of these weights allocated to the various SOP categories within and, in some cases, across the Finished, Intermediate, and Crude goods stages will change. The new allocations will be based primarily on data contained in the Input/Output Accounts published by the Bureau of Economic Analysis.

It is important to note that the allocation update will not change the PPI classification system, reference base, or aggregation structure. It may, however, result in significant shifts in the relative importance of component series in the stage-of-processing indexes. The allocation update will not affect the industry SOP indexes found in tables 10 and 11 of the PPI Detailed Report.

Relative importances as of December 1997, based on both the former and revised weight allocations, will be available on February 18, 1998 on the BLS ftp site at ftp://stats.bls.gov. Choose the "pub" directory, the "special.requests" directory, and the "ppi" directory. The revised SOP relative importances will be in the file, "sopnew.txt". The information may also be requested from the Division of Industrial Prices and Price Indexes, Section of Index Analysis, at 202-606-7705. For further information on this change, please contact Angelo Maggi on (202) 606-7729, or Scott Sager on (202) 606-7700, ext. 211.