December 2006 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 0.9 percent in December, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This rise followed a 2.0-percent advance in November and a 1.6-percent decline in October. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.5 percent in December after climbing 0.7 percent a month earlier, and the crude goods index increased 2.9 percent following a 15.7- percent gain in November. (See table A.)

Among prices for finished goods, the index for energy goods rose 2.5 percent in December compared with a 6.1-percent advance in the prior month. Price increases for finished goods other than foods and energy also slowed in December, gaining 0.2 percent following a 1.3-percent November advance. By contrast, the index for finished consumer foods moved up 1.7 percent after rising 0.1 percent in the previous month.

Before seasonal adjustment, the Producer Price Index for Finished Goods advanced 0.5 percent in December to 160.5 (1982 = 100). In 2006, finished goods prices increased 1.1 percent following a 5.4-percent rise in 2005. This slower rate of advance is attributable to the index for finished energy goods, which fell 2.0 percent in 2006 after climbing 23.9 percent a year earlier. By contrast, prices for finished goods other than foods and energy moved up 2.0 percent in 2006 following a 1.4-percent gain in 2005, and the index for finished consumer foods rose slightly more than it had a year earlier-1.8 percent and 1.7 percent, respectively. At the earlier stages of processing, prices received by intermediate goods producers increased 2.8 percent in 2006 compared with an 8.6-percent advance in the preceding year, while the crude goods index declined 2.4 percent after moving up 21.1 percent in 2005. (See summary table below.)

Crude materials for further processing 17.4 21.1 -2.4 -38.6 6.9 7.5 28.6 Foodstuffs and feedstuffs -2.6 1.6 2.9 -29.1 3.9 18.8 27.6 Crude energy materials 35.9 42.2 -11.4 -55.7 -11.5 8.6 44.6 Crude nonfood materials less energy 20.5 5.2 16.7 17.9 68.9 -7.4 .8 NOTE: Late reports and corrections by respondents may cause some indexes to change 4 months after original publication. In addition, seasonally adjusted indexes may be revised for 5 years due to the recalculation of seasonal factors each January.

Finished goods

The index for finished energy goods rose 2.5 percent in December following a 6.1-percent jump in the prior month. Leading this deceleration, gasoline prices increased 7.1 percent after surging 17.9 percent in November. The indexes for residential natural gas, home heating oil, and diesel fuel also moved up less in December than they had a month earlier. Prices for finished lubricants were unchanged following gains in November. By contrast, the index for liquefied petroleum gas advanced 4.0 percent in December after decreasing 2.8 percent in the previous month. Prices for residential electric power also turned up after declining in November. (See table 2.)

The index for finished goods other than foods and energy advanced 0.2 percent in December following a 1.3-percent jump in the preceding month. Price increases for light motor trucks slowed to 0.7 percent after climbing 13.7 percent in November. The indexes for passenger cars, alcoholic beverages, cosmetics and other toilet preparations, semiconductor manufacturing equipment, agricultural machinery and equipment, and commercial furniture turned down in December. Civilian aircraft prices were unchanged compared with advances in November, while the index for heavy motor trucks rose less in December than it had a month earlier. By contrast, prices for pharmaceutical preparations moved up 0.6 percent following a 0.4-percent decline in November. The indexes for integrating and measuring instruments, railroad equipment, and sanitary paper products also turned up in December. Prices for mobile homes fell less than they had in November.

2005 Dec. 0.3 -0.4 0.4 8.6 2.5 -8.1 1.9 21.1

The index for finished consumer foods increased 1.7 percent in December after inching up 0.1 percent in the previous month. Prices for fresh and dry vegetables jumped 21.7 percent following a 14.2-percent drop in November. The indexes for fresh fruits and melons, finfish and shellfish, and processed turkeys also turned up in December. Prices for processed young chickens and processed fruits and vegetables rose more than they had in November. By contrast, the soft drinks index decreased 0.5 percent in December after advancing 2.1 percent a month earlier. Prices for beef and veal and for bakery products also moved down following gains in November. The index for dairy products increased less in December than it had in the prior month.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components increased 0.5 percent in December following a 0.7-percent advance in November. Prices for intermediate energy goods and for intermediate foods and feeds rose less than they had in the previous month. The index for materials for nondurable manufacturing fell more in December than in the preceding month. Conversely, the indexes for construction materials, as well as materials for durable manufacturing, declined less in December than they had in the prior month. Prices for intermediate goods less foods and energy fell 0.1 percent after decreasing 0.3 percent a month earlier. (See table B.)

The index for intermediate energy goods increased 2.3 percent in December compared with a 4.2-percent gain in November. Diesel fuel prices moved up 10.2 percent after advancing 14.6 percent in the preceding month. The indexes for gasoline, industrial natural gas, and residual fuels also rose less than they had in November. Prices for natural gas to electric utilities and commercial electric power turned down in December after increasing in the prior month. Alternatively, the jet fuels index advanced 12.6 percent following a 5.4-percent decline in November. Prices for liquefied petroleum gas also turned up in December after falling in November. (See table 2.) In 2006, prices for intermediate energy goods declined 4.4 percent after advancing 26.2 percent in 2005.

The rate of increase in the intermediate foods and feeds index slowed from 3.4 percent in November to 1.5 percent in December. Prices for prepared animal feeds rose 4.0 percent in December compared with a 7.4- percent gain a month earlier. The indexes for natural, processed, and imitation cheese and for shortening and cooking oils also advanced less than they had in November. Beef and veal prices turned down in December after rising in the preceding month. The indexes for flour and for refined sugar and byproducts fell more in December than they had a month earlier. By contrast, prices for processed young chickens jumped 10.4 percent in December following a 1.5-percent gain in the prior month. In 2006, the index for intermediate foods and feeds advanced 5.7 percent following a 2.4- percent increase in 2005.

Prices for materials for nondurable manufacturing declined 0.5 percent in December after falling 0.4 percent in November. The indexes for plastic resins and materials, finished fabrics, primary basic organic chemicals, synthetic rubber, and gray fabrics moved down in December. These decreases outweighed rising prices for ethanol, paper, inedible fats and oils, fertilizer materials, intermediate basic organic chemicals, and basic inorganic chemicals. The index for materials for nondurable manufacturing advanced 2.1 percent in 2006 following an 8.9-percent gain in 2005.

The index for materials and components for construction moved down 0.1 percent in December after declining 0.5 percent in November. Prices for steel mill products fell 0.4 percent compared with a 4.4-percent drop in the prior month. The indexes for plastic construction products and softwood lumber also decreased at slower rates than they had a month earlier. Prices for asphalt felts and coatings, wiring devices, and mineral wool for structural insulation turned up after declining in November. By contrast, the index for nonferrous wire and cable moved down 2.6 percent following a 1.1-percent decline in November. Prices for concrete products rose less in December than in the prior month. During 2006, prices for materials and components for construction advanced 4.3 percent after climbing 6.1 percent in the previous year.

The index for materials for durable manufacturing declined 0.2 percent in December following a 0.5-percent decrease in November. Falling prices for semifinished steel mill products; hot rolled steel bars, plates, and structural shapes; thermoplastic resins; copper and brass mill shapes; and building paper and board outweighed price increases for cold rolled steel sheet and strip, hot rolled steel sheet and strip, and primary aluminum (except extrusion billet). In 2006, the index for materials for durable manufacturing jumped 13.1 percent following a 5.9-percent advance in 2005.

Crude goods

The Producer Price Index for Crude Materials for Further Processing rose 2.9 percent in December after climbing 15.7 percent in November. Prices for crude energy materials and for foodstuffs and feedstuffs advanced less than they had a month earlier. Conversely, the index for basic industrial materials rose more than it had in the preceding month. (See table B.)

Price increases for crude energy materials slowed to 5.5 percent in December from 35.8 percent a month earlier. The index for natural gas advanced 6.8 percent following a 92.8-percent jump in the previous month. The coal index decreased 0.6 percent after edging down 0.2 percent in the prior month. By contrast, crude petroleum prices turned up 5.0 percent following a 1.2-percent decline in November. (See table 2.) In 2006, the crude energy materials index fell 11.4 percent after climbing 42.2 percent in 2005.

The index for crude foodstuffs and feedstuffs inched up 0.2 percent after increasing 2.8 percent in the preceding month. In December, rising prices for fluid milk, fresh and dry vegetables, fresh fruits and melons, unprocessed finfish, and alfalfa hay more than offset declining prices for slaughter turkeys, wheat, and slaughter cattle. In 2006, crude foodstuffs and feedstuffs prices rose 2.9 percent following a 1.6-percent increase in 2005.

The basic industrial materials index moved up 1.0 percent after rising 0.5 percent a month earlier. Iron and steel scrap prices turned up 6.8 percent in December following a 5.6-percent decrease in November. The index for softwood logs, bolts, and timber also increased following a decline in the previous month. Prices for wastepaper rose more than they had in November. By contrast, the advance in the gold ores index slowed to 1.2 percent in December after rising 12.0 percent a month earlier. Prices for aluminum base scrap also increased less in December than a month earlier. The indexes for copper base scrap and for construction sand, gravel, and crushed stone turned down after rising in the prior month. Prices for iron ore fell after no change in November. The basic industrial materials index climbed 16.7 percent in 2006 following a 5.2-percent gain in 2005.

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

Mining. The Producer Price Index for the Net Output of Total Mining Industries increased 3.4 percent in December following a 22.8-percent advance in the previous month. (Net output price indexes are not seasonally adjusted.) Prices received by the oil and gas extraction industry group gained 5.6 percent after surging 37.8 percent in November. The industry indexes for gold ore mining and for oil and gas well drilling also rose less than they had in the preceding month. Prices received by the iron ore mining industry declined following no change in November. The industry index for bituminous coal and lignite surface mining decreased more than it had a month earlier. Prices received by the bituminous coal underground mining industry turned down in December, and the industry index for crushed and broken limestone mining and quarrying was unchanged after rising in November. Conversely, prices paid to the anthracite mining industry moved up 0.6 percent in December after falling 3.2 percent in the prior month. In December, the Producer Price Index for the Net Output of Total Mining Industries was 219.0 (December 1984 = 100). In 2006, prices received by the mining sector fell 6.6 percent after rising 38.7 percent in 2005.

Manufacturing. The Producer Price Index for the Net Output of Total Manufacturing Industries edged up 0.3 percent in December after increasing 0.4 percent in the previous month. In December, higher prices received by the manufacturers of petroleum and coal products, food, computer and electronic products, machinery, and fabricated metal products outweighed lower prices paid to the manufacturers of transportation equipment, chemicals, and beverage and tobacco products. In December, the Producer Price Index for the Net Output of Total Manufacturing Industries was 157.0 (December 1984 = 100). In 2006, prices received by the manufacturing sector increased 2.7 percent compared with a 5.4-percent rise in 2005.

Services. Among services industries in December, the industry index for commercial banking decreased 3.9 percent after a 0.8-percent gain in November. Prices paid to securities brokerages and savings institutions also turned down in December after rising in the prior month. The industry index for scheduled passenger air transportation declined after no change in November. Alternatively, prices received by non-casino hotels and motels increased 3.6 percent following a 0.6-percent decrease in November. The industry indexes for general medical and surgical hospitals, investment banking and securities dealing, and wired telecommunications carriers also turned up in December after declining a month earlier.

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 2007 with the release of January 2007 index data, will be based on shipment values from the year 2002. 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 on 1997 census shipment values since January 2002.

All indexes will be affected by this weight update, including all the industry net output indexes, as well as those calculated for traditional commodity groupings. In addition, weights will be updated from the 1997 to the 2002 census for all stage-of-processing 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.

It is important to note that the PPI classification system and aggregation structure will not change as a result of these weight revisions. 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 1997 to 2002.

Relative importance figures as of December 2006, based on the 1997 and 2002 weighting schemes, will be available on February 14, 2007, two business days prior to the release of January 2007 PPI data. This information will be available on the PPI website at www.bls.gov/ppi or by calling the Division of Industrial Prices and Price Indexes, Section of Index Analysis and Public Information at (202) 691-7705.

Recalculated Seasonal Adjustment Factors and Relative Importance Figures to be Available on February 14, 2007

Each year with the release of PPI data for January, seasonal adjustment factors are recalculated to reflect price movements from the just-completed calendar year. This routine annual calculation may result in revisions to seasonally adjusted indexes for the previous 5 years. The following information will be available on February 14, 2007 (2 workdays prior to the release of PPI data for January 2007 on February 16):

* Direct seasonal factors for commodity indexes for the year 2007,

* Recalculated seasonal factors for the last 5 years (2002-2006) for the commodity indexes,

* Recalculated seasonal factors for the last 5 years (2002-2006) for the stage-of-processing indexes.

In addition to recalculated seasonal factors, December 2006 relative importance figures also will be available on February 14, 2007.

To obtain this information, visit the PPI website at www.bls.gov/ppi or by calling the Division of Industrial Prices and Price Indexes, Section of Index Analysis and Public Information at (202) 691-7705.

New Aggregate Net Output Indexes Available

With the February 16, 2007, release of January 2007 Producer Price Index (PPI) data, a new set of industry-based net output aggregate indexes will be published. As with all net output aggregate indexes, the components are assigned weights which exclude shipments to other industries within their aggregation. The new indexes, which will appear in Table 4 of the PPI News Release and Tables 4 and 5 of the PPI Detailed Report, are as follows:

* Total mining, utilities, and manufacturing industries * Total trade industries * Total wholesale trade industries * Total retail trade industries * Transportation and warehousing industries * Transportation industries * Delivery and warehouse industries * Total traditional service industries * Selected healthcare industries * Information * Other selected traditional service industries

Additional information about these indexes is available on the PPI website at www.bls.gov/ppi or by calling the Division of Industrial Prices and Price Indexes, Section of Index Analysis and Public Information at (202) 691-7705.