January 2007 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 declined 0.6 percent in January, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decrease followed a 0.9-percent advance in December and a 1.8-percent jump in November. At the earlier stages of processing, prices for intermediate goods moved down 0.7 percent compared with a 0.5-percent increase in the prior month. The crude goods index decreased 6.3 percent after rising 2.8 percent in December. (See table A.)

2007 Jan. -.6 1.1 -4.6 .2 .2 -.7 -6.3

Among finished goods, prices for energy goods fell 4.6 percent in January following a 2.2-percent rise in the prior month. The rate of increase in the finished consumer foods index slowed to 1.1 percent in January from 1.5 percent in December. By contrast, prices for finished goods other than foods and energy advanced 0.2 percent for the second consecutive month.

Before seasonal adjustment, the Producer Price Index for Finished Goods declined 0.2 percent in January to 160.2 (1982 = 100). From January 2006 to January 2007, prices for finished goods edged up 0.2 percent. Over the same period, the finished consumer foods index advanced 2.7 percent, and prices for finished goods other than foods and energy moved up 1.8 percent. Conversely, the index for finished energy goods fell 7.3 percent. For the 12 months ended January 2007, intermediate goods prices increased 0.9 percent, while the index for crude goods decreased 8.0 percent.

Finished goods

Finished energy goods prices declined 4.6 percent in January compared with a 2.2-percent advance in December. The gasoline index dropped 13.0 percent following a 5.0-percent increase in the previous month. Prices for liquefied petroleum gas, home heating oil, residential natural gas, and diesel fuel also turned down after rising in December. Alternatively, the residential electric power index increased 0.4 percent in January following a 0.3-percent rise a month earlier. (See table 2.)

2007 Jan. 1.9 -3.8 0 .9 2.1 -16.2 1.6 -8.0

The increase in the index for finished consumer foods slowed to 1.1 percent in January from 1.5 percent in the previous month. The index for processed young chickens rose 4.6 percent after climbing 9.1 percent in December. Prices for processed fruits and vegetables also rose less than they had in the prior month. The indexes for fresh fruits and melons and for fresh and dry vegetables turned down in January following advances a month earlier. By contrast, beef and veal prices moved up 3.3 percent in January after falling 2.4 percent in the preceding month. The indexes for pork and bakery products also turned up in January, while prices for dairy products rose more than they had in December.

The index for finished goods other than foods and energy increased 0.2 percent in January after moving up at the same rate in December. In January, rising prices for pharmaceutical preparations; civilian aircraft; cigarettes; women's, girls', and infants' apparel; heavy motor trucks; household appliances; book publishing; and commercial furniture outweighed price declines for light motor trucks, electronic computers, and alcoholic beverages.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components declined 0.7 percent in January following a 0.5-percent increase in December. The majority of this downturn is attributable to prices for intermediate energy goods, which fell in January after rising a month earlier. The index for materials for durable manufacturing decreased more than it had in December. Conversely, prices for materials for nondurable manufacturing declined less than they had a month earlier. The index for materials and components for construction turned up in January, and prices for intermediate foods and feeds increased more than they had in December. The index for intermediate goods other than foods and energy was unchanged for the second consecutive month. (See table B.)

Prices for intermediate energy goods declined 3.8 percent in January subsequent to a 2.5-percent advance in the prior month. The index for diesel fuel fell 13.2 percent following an 8.9-percent rise in December. Prices for gasoline, jet fuels, liquefied petroleum gas, commercial natural gas, and home heating oil also moved down in January after increasing a month earlier. The index for natural gas to electric utilities decreased more than it had in December. Alternatively, prices for commercial electric power rose 0.4 percent in January compared with a 0.7-percent decline in the previous month. The industrial electric power index also turned up after a December decline. (See table 2.)

Prices for materials for durable manufacturing moved down 0.6 percent in January following a 0.2-percent decrease in December. The index for cold rolled steel sheet and strip fell 0.4 percent after advancing 3.6 percent in the prior month. Prices for hot rolled steel sheet and strip and for prepared paint also turned down in January. The index for copper and brass mill shapes declined more than it had in December. By contrast, prices for semifinished steel mill products edged up 0.2 percent compared with a 6.5-percent decrease in the previous month. The index for softwood lumber also turned up in January. Prices for hot rolled steel bars, plates, and structural shapes and for thermoplastic resins declined less than they had a month earlier, while the index for aluminum mill shapes rose more than it had in December.

Prices for materials for nondurable manufacturing inched down 0.1 percent in January following a 0.5-percent decrease in the prior month. The index for plastic resins and materials moved down 0.4 percent subsequent to a 2.7-percent drop a month earlier. Prices for finished fabrics also declined less than they had in December. The indexes for medicinal and botanical chemicals, synthetic rubber, and paint materials turned up in January after decreasing in the previous month. Woodpulp prices rose more than they had in the prior month. By contrast, the industrial chemicals index decreased 1.1 percent after advancing 0.8 percent in December. Prices for inedible fats and oils and for paper also turned down in January.

The index for materials and components for construction edged up 0.2 percent in January following a 0.1-percent decline in the preceding month. Prices for softwood lumber turned up 5.7 percent after decreasing 0.5 percent in December. The indexes for asphalt felts and coatings and for concrete products advanced more than they had in the previous month. Prices for air conditioning and refrigeration equipment increased in January after no change a month earlier, while the index for gypsum products fell less than it had in December. Alternatively, prices for nonferrous wire and cable moved down 4.6 percent following a 2.6-percent decrease in the prior month. The index for plastic construction products also declined more than it had in December, and prices for mineral wool for structural insulation turned down in January.

The increase in the index for intermediate foods and feeds accelerated to 1.9 percent in January from 1.5 percent a month earlier. Prices for confectionery materials rose 12.5 percent compared with a 0.1-percent decline in December. Similarly, the indexes for beef and veal, pork, and for refined sugar and byproducts also turned up in January after falling a month earlier. Prices for fluid milk products advanced more than they had in the prior month. By contrast, the prepared animal feeds index moved up 1.2 percent in January following a 4.0-percent gain in the previous month. Prices for processed young chickens and for shortening and cooking oils also increased less than they had in December.

Crude goods

The Producer Price Index for Crude Materials for Further Processing declined 6.3 percent in January following a 2.8-percent advance in December. This downturn is attributable to prices for crude energy materials, which fell after rising in the previous month. Alternatively, the crude foodstuffs and feedstuffs index increased in January following no change in the preceding month, and prices for basic industrial materials rose more than they had a month earlier. (See table B.)

The crude energy materials index decreased 16.2 percent subsequent to a 5.6-percent advance in December. Prices for natural gas dropped 22.4 percent following a 6.8-percent increase in the prior month. Crude petroleum prices turned down 9.2 percent after rising 5.0 percent a month earlier. The index for coal declined 2.4 percent in January after edging up 0.4 percent in December. (See table 2.)

Prices for crude foodstuffs and feedstuffs increased 2.1 percent following no change in the preceding month. Slaughter cattle prices rose 3.5 percent after inching down 0.2 percent in December. The indexes for slaughter broilers and fryers and for slaughter turkeys also turned up in January after decreasing a month earlier. The indexes for fluid milk and unprocessed finfish advanced more than they had in the prior month. Alternatively, prices for fresh fruits and melons fell 13.4 percent following a 26.3-percent jump in December. The index for fresh vegetables (except potatoes) also turned down after increasing in the previous month. The indexes for corn and wheat declined more in January than they had a month earlier.

The basic industrial materials index moved up 1.6 percent following a 0.5-percent gain in the previous month. Price increases for iron and steel scrap accelerated to 11.8 percent in January from 3.8 percent in December. The indexes for wastepaper; construction sand, gravel, and crushed stone; and phosphates also advanced more than they had a month earlier. Iron ore prices fell less in January than in the prior month. Alternatively, aluminum base scrap prices fell 4.6 percent following a 1.5-percent rise in the prior month. The indexes for gold ores and for softwood logs, bolts, and timber also turned down after increasing in December. Copper base scrap prices decreased more in January than they had a month earlier.

Net output price indexes

Mining, Utilities, and Manufacturing Industries. The Producer Price Index for the Net Output of Total Mining, Utilities, and Manufacturing Industries decreased 0.6 percent in January. (Net output price indexes are not seasonally adjusted.) Leading this decline, prices received by petroleum and coal products manufacturers fell 6.4 percent. The industry indexes for oil and gas extraction, electric power generation, natural gas distribution, and mining support activities also moved down in January. Conversely, prices received by food producers increased 1.1 percent. The industry group indexes for transportation equipment, chemicals, and machinery manufacturing, as well as prices for electric power distribution, also rose in January.

Trade Industries. The Producer Price Index for the Net Output of Total Trade Industries advanced 1.4 percent in January. (Trade indexes measure changes in margins received by wholesalers and retailers.) Most of this increase is attributable to a 44.2-percent jump in margins received by gasoline stations. The margin indexes for merchant wholesalers of durable goods, grocery stores, health and personal care stores, automobile dealers, and for book, periodical, and music stores also rose in January. By contrast, margins received by miscellaneous general merchandise stores decreased 9.5 percent. The margin indexes for electronics and appliance stores, merchant wholesalers of nondurable goods, electronic shopping and mail order houses, and department stores also declined in January.

Transportation and Warehousing Industries. The Producer Price Index for the Net Output of Transportation and Warehousing Industries increased 2.3 percent in January. Leading this advance, prices received by the scheduled passenger air transportation industry rose 12.2 percent. The industry indexes for couriers, long-distance general freight trucking (by the truckload), local specialized freight trucking of new goods, used household and office goods moving, and local general freight trucking also moved up in January. Conversely, prices received by providers of inland water freight transportation services fell 5.0 percent. The industry indexes for pipeline transportation of crude oil, long distance general freight trucking (less than truckload), and airport space leasing for concessions also declined in January.

Traditional Services Industries. The Producer Price Index for the Net Output of Total Traditional Services Industries advanced 0.6 percent in January. Higher prices received by offices of lawyers, the commercial banking industry, general medical and surgical hospitals, offices of physicians (excluding mental health), portfolio managers, and by direct health and medical insurance carriers outweighed lower prices received by non-casino hotels and motels, wired telecommunications carriers, and the passenger car rental industry.

Recalculation of Seasonal Adjustment Factors

Effective with this release, seasonal adjustment factors have been recalculated to reflect price-movement patterns during 2006 for stage-of- processing (SOP) and commodity-grouping indexes. This routine annual recalculation may affect previously published seasonally adjusted indexes and percent changes for January 2002 through December 2006. Revised seasonally adjusted data for this period, as well as seasonal adjustment factors for commodity indexes to be used through December 2007, were released February 14, 2007. To obtain this information, contact the Division of Industrial Prices and Price Indexes, Section of Index Analysis and Public Information at ppi-info@bls.gov or (202) 691-7705, or visit the Producer Price Index homepage at www.bls.gov/ppi.

The table below provides monthly seasonally adjusted percent changes for the three major SOP categories during 2006, based on former and recalculated seasonal factors. These percent changes include final price data through August 2006 and may differ from values shown in tables A and B of this release, which include final price data through September 2006.

PPI Weights Updated

The Bureau of Labor Statistics has updated the value weights used to calculate Producer Price Indexes to more accurately reflect recent production and marketing patterns. The new weights, which were introduced in February 2007 with the release of January 2007 index data, are 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 had been based on 1997 census shipment values since January 2002.

All indexes were affected by this weight update, including all industry net output indexes, as well as indexes calculated for traditional commodity groupings. In addition, weights were 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 does not change the arithmetic reference base, in most cases 1982 = 100, of the PPI index system.

The PPI classification system and aggregation structure did not change due to these weight revisions. The weight update, however, did result in significant shifts in the relative importance of some 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, were made available on February 14, 2007, two business days prior to the release of January 2007 PPI data. To obtain this information, contact the Division of Industrial Prices and Price Indexes, Section of Index Analysis and Public Information at ppi- info@bls.gov or (202) 691-7705, or visit the Producer Price Index homepage at www.bls.gov/ppi.

Introduction of Industries

Effective with this release, the Producer Price Index (PPI) includes data for 3 newly introduced industries classified according to the North American Industry Classification System (NAICS). For further discussion of these newly introduced PPIs, or for information regarding specific index additions, deletions, and recodes that are effective with the January 2007 data release, see the January 2007 issue of the PPI Detailed Report, visit www.bls.gov/ppi, or contact the PPI's Section of Index Analysis and Public Information at ppi-info@bls.gov or (202) 691-7705.

NAICS Code Industry 236223 New office building construction 541610 Management consulting services 621991 Blood and organ banks

New Aggregate Net Output Indexes Available

Effective with this release, a new set of industry-based net output aggregate indexes are available. As with all net output aggregate indexes, component indexes are assigned weights which exclude shipments to other industries within the same aggregation. The new indexes, which appear in Table 4 of the PPI News Release and 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

To obtain information about these indexes, contact the Division of Industrial Prices and Price Indexes, Section of Index Analysis and Public Information at ppi-info@bls.gov or (202) 691-7705, or visit the Producer Price Index homepage at www.bls.gov/ppi.