December 1997 Producer Price Index

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The Producer Price Index for Finished Goods decreased 0.2 percent in December, seasonally adjusted, the Bureau of Labor Statistics of the U. S. Department of Labor reported today. This followed a decrease of 0.2 percent in November. The index for finished goods other than foods and energy declined 0.1 percent for the second consecutive month. Prices received by domestic producers of intermediate goods declined 0.2 percent after rising 0.2 percent in November. The crude materials index fell 5.6 percent, following a 1.6-percent gain in the prior month. (See table A.)

Among finished goods in December, prices fell for all major groupings -- capital equipment, finished consumer goods other than foods and energy, finished energy goods, and finished consumer foods. Each of these indexes also declined in November.

Change in Except finished Inter- goods foods from 12 mediateCrude and months Month Total Foods Energy energy ago goods Goods (unadj.) 1996 Dec. 0.5 -0.2 3.3 0.1 2.8 0.5 6.2

Before seasonal adjustment, the Producer Price Index for Finished Goods declined 0.5 percent in December to stand at 131.1 (1982=100). From December 1996 to December 1997, the finished goods index decreased 1.2 percent after increasing 2.8 percent in 1996. The last larger calendar-year decline for finished goods was in 1986, when the index dropped 2.3 percent due to falling energy prices. Prices for finished energy goods fell 6.4 percent in 1997 after advancing 11.7 percent in 1996. The index for finished consumer foods declined 1.0 percent in 1997, following a 3.4- percent rise in 1996. Prices for finished goods other than foods and energy inched up 0.1 percent in 1997 after rising 0.6 percent in 1996. At the earlier stages of processing, prices for intermediate goods moved down 0.8 percent in 1997 after moving up 0.7 percent in 1996. The index for crude materials decreased 11.7 percent in 1997, following an advance of 14.7 percent in the previous year.

Finished goods

Prices for capital equipment fell 0.2 percent in December after declining 0.1 percent in November. The capital equipment index declined 0.5 percent during 1997 after increasing 0.4 percent in the previous year. In December, price declines for light motor trucks, electronic computers, transformers and power regulators, and railroad equipment outweighed price increases for civilian aircraft, commercial furniture, and heavy motor trucks.

The December index for finished consumer goods other than foods and energy fell 0.1 percent following a similar decline in November. From December 1996 to December 1997, this index increased 0.3 percent after rising 0.8 percent in the previous year. In December, price declines for passenger cars, light trucks, household appliances, and cosmetics slightly outweighed price increases for tobacco products, alcoholic beverages, newspaper circulation, and women's apparel.

The index for finished energy goods fell 0.2 percent in December, following a 0.8-percent decrease in the previous month. The slower rate of decline this month was caused by the indexes for gasoline and residential electric power, both of which fell less in December than in November. By contrast, prices for residential natural gas and home heating oil, which had risen in November, turned down in December.

The index for finished consumer foods decreased 0.1 percent in December for the second consecutive month. Prices declines for beef and veal, pork, eggs for fresh use, shortening and cooking oils, and finfish and shellfish slightly outweighed price increases for fresh fruits and melons and dairy products.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components fell 0.2 percent in December, seasonally adjusted, after rising 0.2 percent a month earlier. The indexes for energy goods, foods and feeds, nondurable manufacturing materials, and construction materials also turned down following an increase in November. Prices for durable manufacturing materials fell more than a month ago. Excluding foods and energy, the intermediate materials index declined 0.1 percent after rising 0.1 percent in the prior month. (See table B.)

Prices for intermediate energy goods turned down 1.0 percent, following a 0.5-percent gain in November. From December 1996 to December 1997, this index decreased 7.0 percent after rising 11.2 percent in 1996. December's downturn in prices for intermediate energy goods was led by the index for residual fuel, which turned down 12.4 percent after increasing 6.2 percent in the previous month. Prices for #2 diesel fuel, commercial natural gas, and liquefied petroleum gas also fell after rising a month earlier. The index for industrial electric power showed no change following a 1.7-percent increase in November. On the other hand, prices for commercial electric power turned up 0.7 percent after dropping 0.3 percent in the prior month. Prices for gasoline fell less than a month ago.

The index for intermediate foods and feeds decreased 0.9 percent, following a 1.6-percent increase in November. Prices for intermediate foods and feeds turned down 1.8 percent in 1997 after rising 2.1 percent in the previous year. In December, the index for prepared animal feeds fell 0.2 percent after gaining 0.9 percent a month earlier. Prices for confectionery materials and pork also decreased after rising in the previous month. The index for fluid milk products rose less than in the prior month. By contrast, prices for natural, processed, and imitation cheese increased 2.9 percent following a 2.2-percent gain in November. The indexes for beef and veal and refined sugar fell less than a month ago.

The index for nondurable manufacturing materials decreased 0.2 percent after rising 0.2 percent in November. This index increased 0.4 percent during 1997 following a 3.3-percent decline in 1996. In December, prices for alkalies and chlorine fell 0.3 percent after increasing 7.7 percent in the previous month. The indexes for paperboard and basic inorganic chemicals rose less than in the prior month. Prices for nitrogenates fell more than a month ago. Conversely, the index for gray fabrics rose 0.3 percent after declining 0.6 percent in November. Prices for plastic resins and materials and for primary basic organic chemicals fell less than in the prior month.

Prices for durable manufacturing materials declined 0.7 percent, following a 0.2-percent drop in November. Over the year, this index showed no change after decreasing 1.4 percent in 1996. In December, prices for hot rolled sheet and strip fell 1.3 percent after decreasing 0.1 percent in the prior month. The copper index also declined more than in the previous month. Prices for building paper and plywood turned down after rising in November. By contrast, the index for copper and brass mill shapes fell 0.8 percent following a 2.8-percent decline in the prior month. Prices for silver turned up after falling a month ago.

The index for construction materials decreased 0.1 percent after rising 0.2 percent in November. This index advanced 1.3 percent during 1997, following a 1.8-percent increase in 1996. In December, prices for softwood lumber turned down 0.1 percent following a 1.8-percent rise in the previous month. The index for plywood also fell after rising a month ago. Prices for fabricated structural metal products showed no change after increasing in November. On the other hand, the index for millwork turned up 0.1 percent following a 0.2-percent decline in the previous month. Prices for steel wire and for air conditioning and refrigeration equipment also turned up after falling in November.

Crude goods

The Producer Price Index for Crude Materials for Further Processing declined 5.6 percent in December, seasonally adjusted, following a 1.6- percent advance in November. Prices for crude energy materials fell after rising a month earlier. The indexes for basic industrial materials and crude foodstuffs and feedstuffs decreased more than last month. (See table B.)

Prices for crude energy materials dropped 12.6 percent in December, following a 5.0-percent gain a month earlier. From December 1996 to December 1997, this index declined 23.9 percent after advancing 51.2 percent during 1996. In December, the index for natural gas declined 18.7 percent after an 11.0-percent advance in the prior month. Prices for crude petroleum fell more than in the previous month. By contrast, the index for coal rose 2.0 percent following a 0.7-percent decrease last month.

The index for crude nonfood materials less energy declined 1.5 percent in December, following a 0.7-percent decline in the prior month. This index increased 0.1 percent during 1997 following a 5.5-percent decrease in the previous year. In December, prices for raw cotton decreased 11.4 percent after a 3.1-percent increase one month ago. The index for iron and steel scrap rose less than one month earlier. Prices for gold ores and copper base scrap fell more than in the previous month. The indexes for cattle hides and softwood logs, bolts, and timber fell after rising in November. By contrast, prices for leaf tobacco rose 8.3 percent following a 2.9-percent decline in the previous month. The indexes for copper ores and wastepaper fell less than last month.

Prices for crude foodstuffs and feedstuffs declined 0.7 percent in December, following a 0.3-percent decline in the prior month. During 1997, this index declined 4.2 percent after declining 1.0 percent in the previous year. In December, the index for slaughter hogs decreased 7.8 percent after a 7.4-percent increase a month earlier. Prices for soybeans, slaughter turkeys, and unprocessed shellfish also turned down after rising in November. The index for fluid milk rose less than in the previous month. By contrast, prices for slaughter cattle advanced 1.7 percent after a 3.4-percent decline in the prior month. The indexes for fresh fruits and melons, slaughter broilers and fryers, and unprocessed finfish also turned up after falling a month earlier. Prices for fresh and dry vegetables fell less than one month ago.

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 9.9 percent in December, following a 3.6-percent advance in November. (Net output price indexes are not seasonally adjusted.) The index for the oil and gas extraction industry group fell 12.6 percent after a 5.3-percent rise in the previous month. Prices for the nonmetalic minerals mining industry group decreased 0.2 percent after increasing 0.4 percent one month ago. By contrast, prices for the coal mining industry group rose 1.3 percent after falling 0.4 percent last month. The index for the metal mining industry group fell 6.0 percent after declining 7.0 percent in the prior month. In December, the Producer Price Index for the net output of total domestic mining industries stood at 82.8 (December 1984=100), 20.5 percent below its year-ago level.

Manufacturing. The Producer Price Index for the net output of total domestic manufacturing industries declined 0.4 percent in December, following a 0.2-percent decrease in November. In December, prices for the food and kindred products, petroleum refining, and primary metal industry groups fell more than in the prior month. The indexes for the leather and leather products, nonmetallic mineral products, and electrical and electronic machinery industry groups declined after advancing in the previous month. By contrast, prices for the tobacco manufactures, paper and allied products, and printing and publishing industry groups rose more than in the prior month. Prices for the textile mill products, machinery (except electrical) and miscellaneous manufacturing industries industry groups showed no change after falling. In December, the Producer Price Index for the net output of the total domestic manufacturing sector stood at 127.0 (December 1984=100), 0.8 percent below its year-ago level.

Other. Among other industries in December, prices for local trucking without storage, real estate agents and managers, scheduled air transportation, deep sea foreign transportation of freight, airports and airport services, and psychiatric hospitals rose after falling in November. Prices for cable and other pay television services, building cleaning and maintenance services, and legal services rose more than in the previous month. Prices for trucking (except local) and telephone communications fell less than a month ago. Prices for crude petroleum pipelines showed no change after falling. Conversely, the indexes for radio broadcasting and specialty hospitals, except psychiatric, rose less than in the prior month. The indexes for deep sea domestic transportation of freight, travel agencies, hotels and motels, and advertising agencies fell after rising. The indexes for railroads, line-haul operating, help supply services, marine cargo handling, and architectural services showed no change after rising in November.

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.

The following is the schedule of 1998 release dates for Producer Price Index data: Reference Month Release Date January 1998 Wednesday, February 18 February Friday, March 13 March Thursday, April 9 April Wednesday, May 13 May Friday, June 12 June Friday, July 10 July Friday, August 14 August Friday, September 11 September Thursday, October 15 October Friday, November 13 November Friday, December 11 December Wednesday, January 13, 1999

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 13, 1998, two working days before release of the January 1998 PPI, 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.