October 2001 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 (PPI) for Finished Goods decreased 1.6 percent in October, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decline followed two consecutive monthly increases of 0.4 percent. Price decreases for energy goods, passenger cars, light trucks, and consumer foods led the decline in the finished goods index in October. At the earlier stages of processing, prices received by intermediate goods producers fell 1.5 percent, compared with a 0.1-percent increase in September. The crude goods index dropped 9.1 percent in October, after declining 4.1 percent a month earlier. (See table A.)

Because of the recent disruptions to mail service in the Washington D.C. metropolitan area, the response rate for the October PPI was reduced to approximately 80 percent of its normal level. A review was undertaken to evaluate the impact of lower response rates on survey estimates. No unusual effects were found. In particular, response rates for passenger cars, light trucks, and gasoline were about normal in October.

Among finished goods, prices for finished energy goods decreased 7.7 percent, following a 0.9-percent gain in September. The index for finished consumer foods fell 0.4 percent, after rising 0.2 percent in September. The index for finished goods other than foods and energy turned down 0.5 percent, after posting a 0.3-percent gain in September. Excluding passenger cars and light trucks, prices for finished goods other than foods and energy would have shown no change in October.

For the first 10 months of 2001, the Producer Price Index for Finished Goods decreased at a 0.8-percent seasonally adjusted annual rate (SAAR), after rising 3.6 percent for the 2000 calendar year. Prices for finished goods other than foods and energy rose at a 0.8-percent SAAR for the first 10 months of 2001, after posting a 1.3-percent gain in 2000. The index for intermediate goods fell at a 3.2-percent SAAR from December 2000 to October 2001, following a 4.1-percent increase for the 12 months ended December 2000. Prices for crude goods dropped at a 35.2-percent SAAR during the first 10 months of 2001, after a 35.5-percent rise during all of 2000.

Before seasonal adjustment the Producer Price Index for Finished Goods decreased 1.5 percent, to stand at 139.6 (1982=100). From October 2000 to October 2001, prices for finished goods fell 0.4 percent. During the same period, the index for finished energy goods declined 9.5 percent. On the other hand, prices for finished consumer foods rose 2.8 percent for the 12 months ended October 2001 and the index for finished goods other than foods and energy gained 0.8 percent over the same period. At the earlier stages of processing, prices for both intermediate goods and crude goods declined during the past 12 months -- down 2.4 percent and 25.0 percent, respectively.

Finished Goods

The index for finished energy goods turned down 7.7 percent in October, after increasing 0.9 percent in September. October's 21.2-percent decrease in gasoline prices (the largest monthly decline since a 22.1- percent decrease in March 1986) followed a 6.3-percent increase in September. The indexes for home heating oil, liquefied petroleum gas, and diesel fuel also turned down in October. Prices for residential natural gas decreased at a faster rate than they did in September. By contrast, the residential electric power index turned up 0.5 percent in October, following a 0.4-percent fall in the prior month.

The index for finished consumer goods other than foods and energy decreased 0.4 percent, following a 0.4-percent gain in September. Passenger car prices declined 4.7 percent in October, after increasing 1.3 percent in the previous month. In accordance with usual practice, most new model year passenger cars and light trucks were introduced into the PPI in October. (See Report on Quality Changes for 2002 Model Vehicles.) October's falling prices for passenger cars were largely due to increased incentives, such as low- or no-cost financing. The indexes for light motor trucks and book publishing also turned down, after advancing a month ago. Prices for sanitary paper and health products, alcoholic beverages, and for sporting and athletic goods rose less than they did in September. The pharmaceutical preparations index showed no change, after increasing last month. Prices for men's and boys' apparel showed no change in October, following a 0.5-percent decline in September. The indexes for cosmetics and other toilet preparations, footwear, textile housefurnishings, and floor coverings turned up, after falling last month. Prices for newspaper circulation and mobile homes advanced at a faster rate than they did in September.

Prices for capital equipment declined 0.7 percent in October, after edging up 0.1 percent in September. The index for passenger cars dropped 4.7 percent, following a 1.3-percent gain in the previous month. Prices for light motor trucks, communication and related equipment, pumps and compressors, and industrial material handling equipment also turned down in October. The heavy motor truck index showed no change, after rising in the prior month. On the other hand, the index for electronic computers rose 0.2 percent in October, following a 6.2-percent decrease in September. Prices for civilian aircraft fell less than they did in the prior month. The index for commercial furniture advanced, after registering no change in September. Prices for agricultural machinery and equipment, printing trades machinery, and truck trailers turned up in October, compared with decreases in the previous month.

The finished consumer foods index fell 0.4 percent in October, after posting a 0.2-percent gain in the prior month. Prices for fresh and dry vegetables turned down 11.4 percent, after rising 2.4 percent in September. The index for finfish and shellfish also decreased, after rising a month ago. Prices for dairy products, pork, and soft drinks fell more than they did in the previous month. The fresh fruits and melons index advanced less than it did in September. On the other hand, prices for eggs for fresh use rose 4.4 percent in October, following a 0.4-percent increase last month. The indexes for processed young chickens and confectionery end products rose at a faster rate in October than they did in September. Prices for beef and veal and for shortening and cooking oils declined less than they did in the prior month. The bakery products index increased, after showing no change a month ago.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components fell 1.5 percent in October, after inching up 0.1 percent in September. Prices for intermediate energy goods also turned down in October. The indexes for nondurable manufacturing materials, durable manufacturing materials, materials and components for construction, and intermediate foods and feeds decreased at a faster pace in October than they did in the prior month. Excluding foods and energy, the intermediate materials index decreased 0.4 percent, following a 0.1-percent dip in September. (See table B.)

Intermediate energy goods prices dropped 7.6 percent in October, after posting a 1.0-percent gain in September. The gasoline index plummeted 21.2 percent, following a 6.3-percent increase in the prior month. Prices for diesel fuel, commercial electric power, residual fuel, and liquefied petroleum gas also turned down, after rising a month ago. The indexes for jet fuels and industrial natural gas fell more than they did in the preceding month. By contrast, industrial electric power prices turned up 0.7 percent in October, following a 0.6-percent decline in September. The indexes for natural gas to electric utilities and commercial natural gas fell less than they did in the previous month.

Prices for materials for nondurable manufacturing decreased 0.9 percent in October, following a 0.1-percent decline in September. The index for industrial chemicals turned down 2.7 percent, after registering a 1.8-percent advance a month earlier. Price increases slowed from September to October for paint materials and phosphates. The indexes for inedible fats and oils and paperboard fell more in October than they did in the previous month. On the other hand, prices for plastic resins and materials turned up 1.3 percent, following a 2.7-percent drop a month ago. The indexes for nitrogenates, fertilizer materials, and leather declined at a slower rate than they did in the prior month.

Prices for materials for durable manufacturing decreased 0.6 percent in October, following a 0.2-percent decline in September. The index for primary aluminum (except extrusion billet) fell 4.0 percent, after rising 0.7 percent in the preceding month. Similarly, prices for hot rolled bars, plates, and structural shapes and for copper and brass mill shapes also turned down, following gains in the prior month. The plywood index declined more rapidly in October than it did in September. Prices for hot rolled sheet and strip fell, after showing no change a month ago. Partially counteracting these price movements, the index for aluminum mill shapes turned up 0.3 percent, following a 2.9-percent decline in the previous month. The rate of increase in prices for semi-finished steel mill products and cement accelerated from September to October. The prepared paint index edged up, after falling a month ago. In October, hardwood lumber prices decreased less rapidly than they did in the prior month.

The construction materials index declined 0.3 percent in October, after edging down 0.1 percent in September. Softwood lumber prices dropped 4.4 percent, following a 0.3-percent decrease a month earlier. The indexes for plywood and fabricated structural metal products also fell at a faster rate than they did in the previous month. Prices for asphalt felts and coatings, gypsum products, and millwork rose less in October than in September. The index for switchgear turned down, after rising a month ago. Conversely, prices for plastic construction products advanced 2.7 percent in October, following a 2.0-percent decline in September. The index for plumbing fixtures and brass fittings also turned up, after a decrease in the prior month. Prices for nonferrous wire and cable and for hardwood lumber fell less than they did in the preceding month.

The index for intermediate foods and feeds declined 0.8 percent in October, after falling 0.4 percent in September. Prices for dairy products decreased 1.9 percent, following a 0.7-percent drop in the prior month. The indexes for natural, processed, and imitation cheese and for refined sugar turned down, after posting gains a month ago. Prices for prepared animal feeds, crude vegetable oils, pork, and fluid milk products fell more rapidly than they did in September. By contrast, the beef and veal index decreased 0.6 percent in October, following a 1.1-percent decline in the previous month. Prices for confectionery materials and for mayonnaise, salad dressings, and sandwich spreads turned up, after falling a month earlier. In October, the flour index rose more than it did in September.

Crude goods

The Producer Price Index for Crude Materials for Further Processing dropped 9.1 percent in October, after registering a 4.1-percent decline in September. Accounting for a majority of this accelerating rate of decrease, October prices for crude energy materials fell more than they did a month earlier. Also contributing to this faster rate of decline, the indexes for crude foodsuffs and feedstuffs and for basic industrial materials turned down, after rising in September. (See table B.)

Prices for crude energy materials dropped 19.2 percent in October, following a 10.7-percent decrease in September. The crude petroleum index turned down 19.6 percent, after a 0.1-percent gain in the prior month. Posting its sixth consecutive monthly decline, natural gas prices fell 27.5 percent, following a 22.8-percent decline in September. The coal index exhibited a slowing rate of increase, edging up 0.5 percent in October, after rising 2.5 percent in the previous month.

After a 1.1-percent advance in September, prices for crude foodstuffs and feedstuffs turned down 2.6 percent in October. The index for slaughter cattle fell 3.2 percent, following a 0.5-percent gain in the prior month. Prices for corn, unprocessed shellfish, unprocessed finfish, and fresh vegetables (except potatoes) also decreased in October, after increasing in September. The indexes for fluid milk and slaughter hogs declined more than they did in the previous month, while prices for slaughter broilers and fryers rose less in October than they did a month earlier. By contrast, the index for soybeans fell at a 6.0-percent rate in October, compared with a 9.4-percent rate of decrease in September. Alfalfa hay prices advanced more than they did in the prior month. The index for raw cane sugar was unchanged in October, following a 0.3-percent decline a month earlier.

Prices for crude nonfood materials less energy turned down 1.7 percent in October, after inching up 0.2 percent in September. The raw cotton index dropped at a 15.2-percent rate, following a 4.8-percent rate of decrease in the previous month. Prices for iron and steel scrap and for pulpwood also fell more in October than they did a month earlier. The indexes for hides and skins, nonferrous metal ores, wastepaper, and softwood logs, bolts, and timber turned down in October. Leaf tobacco prices increased at a slower rate than they did in the prior month. On the other hand, the index for aluminum base scrap advanced 0.5 percent, following a 1.7-percent decline in September. October prices for construction sand, gravel, and crushed stone rose slightly more than they did a month earlier.

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

Mining. The Producer Price Index for the Net Output of Total Mining Industries fell 14.9 percent in October, following a 7.8-percent decline in September. (Net output price indexes are not seasonally adjusted.) The majority of October's faster rate of decrease was due to a 21.6-percent drop in prices received by the crude petroleum, natural gas, and natural gas liquids industry, compared with an 11.5-percent fall in the previous month. The indexes for the bituminous coal and lignite and gold ores industries rose less than they did a month ago. Prices received by the oil and gas well drilling industry and the oil and gas field exploration services industry turned down, after increasing in the prior month. On the other hand, the index for the potash, soda, and borate minerals industry advanced 0.8 percent in October, following a 0.7-percent decline in September. Prices received by the industrial sand industry turned up, after falling in the prior month. The index for the coal mining services industry increased at a faster rate than it did in September. Prices received by the non-metallic minerals services (except fuels) industry showed no change, after decreasing last month. In October, the Producer Price Index for the Net Output of Total Domestic Mining Industries stood at 78.8 (December 1984 = 100), 40.2 percent below its year-ago level.

Manufacturing. The Producer Price Index for the Net Output of Total Manufacturing Industries dropped 1.5 percent in October, following a 0.6- percent increase in September. Accounting for most of this deceleration, prices received by the petroleum refining and related products industry group fell 18.7 percent, after jumping 8.1 percent a month ago. The industry group index for food and kindred products decreased, after showing no change last month. Prices received by the chemicals and allied products, measuring and controlling instruments, and paper and allied products industry groups turned down, after showing increases in September. The industry group index for lumber and wood products (except furniture) fell more than it did in the prior month. By contrast, prices received by the transportation equipment industry group rose 0.9 percent in October, after showing no change in September. The industry group indexes for rubber and miscellaneous plastic products and printing, publishing, and allied industries turned up, after declining last month. Prices received by the machinery (except electrical) industry group decreased at a slower rate than they did a month ago. The industry group index for electrical and electronic machinery, equipment, and supplies advanced, after showing no change in the previous month. In October, the Producer Price Index for the Net Output of Total Domestic Manufacturing Industries stood at 133.6 (December 1984 = 100), 1.0 percent below its year-ago level.

Services. Among service industries in October, advancing prices were registered by the industries for general medical and surgical hospitals, scheduled air transportation, railroads (line-haul operating), property and casualty insurance, specialty hospitals (except psychiatric), local trucking without storage, cable and other pay television services, hotels and motels, and home health care services. On the other hand, the industries for telephone communications (except radiotelephone), deep sea foreign transportation of freight, operators and lessors of nonresidential buildings, passenger car rental, real estate agents and managers, trucking (except local), and freight transportation arrangement experienced falling prices in October.

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 in February 2002 with the release of January 2002 index data, will be based on shipment values from the year 1997. 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 1992 census shipment values since January 1996.

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 1992 to the 1997 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 on February 13, 2002, SIC- classified indexes will reflect updated input/output (I/O) ratios based on the 1992 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 1987 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 1992 to 1997.

Relative importances as of December 2001 on the 1992 and 1997 weighting schemes will be available on February 13, 2002. To request this information call the Division of Industrial Prices and Price Indexes, Section of Index Analysis at 202-691-7705.