October 2008 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 fell 2.8 percent in October, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decrease followed a 0.4-percent decline in September and a 0.9-percent fall in August. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved down 3.9 percent in October after declining 1.2 percent in September, and the crude goods index dropped 18.6 percent subsequent to a 7.9-percent decrease in the previous month. (See table A.)

Among finished goods in October, prices for energy goods fell 12.8 percent compared with a 2.9-percent decline a month earlier. The index for consumer foods edged down 0.2 percent following a 0.2-percent increase in the prior month. Prices for goods other than foods and energy rose 0.4 percent for the second consecutive month.

Before seasonal adjustment, the Producer Price Index for Finished Goods declined 2.6 percent in October to 177.3 (1982 = 100). For the 12 months ended in October, finished goods prices advanced 5.2 percent. Over the same period, prices for finished consumer foods climbed 6.5 percent, the index for finished energy goods increased 5.5 percent, and the index for finished goods other than foods and energy rose 4.4 percent. From October 2007 to October 2008, prices received by intermediate goods producers advanced 10.2 percent, while the crude goods index decreased 1.4 percent.

Finished goods

The index for finished energy goods moved down 12.8 percent in October following a 2.9-percent decline in September. Gasoline prices dropped 24.9 percent after falling 0.5 percent a month earlier. The indexes for liquefied petroleum gas, diesel fuel, and residential electric power also decreased more than in the prior month. Prices for asphalt and finished lubricants turned down in October. By contrast, partially offsetting the faster rate of decline in finished energy goods prices, the index for residential natural gas moved down 5.9 percent compared with an 8.2-percent decline in September. Prices for home heating oil also fell less than in the previous month. (See table 2.)

The index for finished consumer foods edged down 0.2 percent in October after rising 0.2 percent in September. Leading this downturn, meat prices decreased 5.6 percent subsequent to a 0.6-percent fall a month earlier. Prices for mayonnaise, salad dressings, and sandwich spreads; unprocessed finfish; and canned fruits and juices turned down in October. By contrast, the processed young chickens index increased 5.9 percent following a 0.6-percent decline in September. Prices for natural cheese (except cottage cheese) and melons also turned up in October. The indexes for fresh vegetables (except potatoes) and for sugar and confectionary products advanced more than they had a month earlier.

The index for finished goods other than foods and energy increased 0.4 percent in October, the same as in September. Price increases for light motor trucks, civilian aircraft, malt beverages, rubber and rubber products, consumer plastic products, and for commercial nonwood furniture and store fixtures were partially offset by price decreases for passenger cars, pharmaceutical preparations, and for electronic computers and computer equipment. In accordance with usual practice, most new-model-year passenger cars and light motor trucks were introduced into the PPI in October. (See Report on Quality Changes for 2009 Model Vehicles, USDL 08-1712.) In October, the index for passenger cars moved down 1.7 percent and light motor truck prices rose 2.6 percent. For the 12 months ended October 2008, the passenger cars index rose 2.4 percent and prices for light motor trucks advanced 2.6 percent.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components declined 3.9 percent in October after falling 1.2 percent in September. The indexes for intermediate energy goods, materials for nondurable manufacturing, intermediate foods and feeds, and materials for durable manufacturing also decreased more in October than they had a month earlier. Prices for materials and components for construction turned down after rising in September. (See table B.)

The index for intermediate energy goods dropped 10.6 percent in October after falling 3.8 percent in the prior month. Diesel fuel prices declined 16.4 percent following a 6.4-percent decrease in September. The indexes for gasoline, jet fuel, residual fuels, natural gas to electric utilities, commercial natural gas, and liquefied petroleum gas also fell more in October. By contrast, partially offsetting the faster rate of decline in the intermediate energy goods index, industrial electric power prices advanced 2.6 percent after decreasing 1.4 percent in September. The index for commercial electric power moved up after no change a month earlier. (See table 2.)

The index for materials for nondurable manufacturing decreased 4.6 percent in October following a 2.9-percent decline in the previous month. Prices for primary basic organic chemicals plunged 20.8 percent after moving down 7.4 percent in September. The indexes for fertilizer materials and synthetic fibers turned down in October. Prices for basic inorganic chemicals, medicinal and botanical chemicals, and synthetic rubber rose less than in the preceding month. The indexes for inedible fats and oils and for meats fell more than they had in September. By contrast, the index for cyclic intermediate chemicals and dyes was unchanged in October following a 2.2-percent decline a month earlier. Prices for woodpulp fell less than in September.

Prices for intermediate foods and feeds decreased 5.5 percent in October compared with a 0.9-percent decline in the prior month. The index for prepared animal feeds fell 8.6 percent after edging down 0.3 percent in the preceding month. Prices for meats, fats and oils, and fluid milk products also decreased more than they had in September. The indexes for processed eggs and for mayonnaise, salad dressings, and sandwich spreads turned down in October. Conversely, the index for processed young chickens advanced 5.9 percent after falling 0.6 percent in September. Prices for natural cheese (except cottage cheese) also turned up in October. The indexes for sugar and confectionery products and for canned, cooked, smoked, and prepared poultry rose more than they had in September.

Prices for materials and components for construction declined 0.7 percent in October after increasing at the same rate in the preceding month. The index for paving mixtures and blocks fell 3.7 percent following a 3.1-percent September gain. Prices for structural, architectural, and pre-engineered metals products; ready-mix concrete; treated wood; cast iron pressure and soil pipe and fittings; and sheet metal products also turned down in October. The indexes for nonferrous wire and cable and for softwood lumber decreased more than they had a month earlier. Conversely, millwork prices rose 0.6 percent in October after inching up 0.1 percent in the prior month. Prices for gypsum products turned up after falling in September.

Prices for materials for durable manufacturing declined 4.1 percent in October after falling 3.2 percent in the preceding month. The index for hot rolled steel bars, plates, and structural shapes dropped 8.5 percent following a 4.4-percent decrease in September. Prices for nonferrous wire and cable, both hot and cold rolled steel sheet and strip, softwood lumber, and primary nonferrous metals also fell more in October than a month earlier. The index for synthetic fibers turned down after increasing in the previous month. By contrast, the rate of decline in prices for semifinished steel mill products slowed from 4.8 percent in September to 1.9 percent in October. The index for copper and brass mill shapes also fell less than it had in the prior month.

Crude goods

The Producer Price Index for Crude Materials for Further Processing dropped 18.6 percent in October following a 7.9-percent decline in September. The faster rate of decrease in crude goods prices was broad based: the indexes for energy goods, foodstuffs and feedstuffs, and nonfood materials less energy all fell more in October than they had in the prior month. (See table B.)

The index for crude energy goods decreased 24.9 percent in October after moving down 11.7 percent in September. Crude petroleum prices fell 26.0 percent subsequent to a 9.0-percent decline in the preceding month. The natural gas index also dropped more in October than it had in September - 29.1 percent and 16.5 percent, respectively. Coal prices advanced 0.4 percent in October following a 0.7-percent increase a month earlier. (See table 2.)

The index for crude foodstuffs and feedstuffs declined 11.1 percent in October after falling 1.1 percent in the preceding month. Prices for Irish potatoes for processing dropped 41.8 percent following a 258.7-percent surge in September. The indexes for ungraded chicken eggs and slaughter sows also turned down in October. Prices for corn, soybeans, wheat, and slaughter cattle decreased more than they had in September. By contrast, slightly counteracting the faster rate of decline in crude foodstuffs and feedstuffs prices, the index for slaughter chickens jumped 7.0 percent in October subsequent to a 1.0-percent drop in the prior month. Prices for fluid milk and for slaughter barrows and gilts decreased at slower rates than they had in September.

The index for crude nonfood materials less energy fell 17.0 percent in October subsequent to a 9.4-percent decline in the previous month. Prices for carbon steel scrap dropped 39.8 percent after decreasing 22.5 percent in September. The indexes for nonferrous scrap, wastepaper, soybeans, and grains also moved down more in October than they had a month earlier. Prices for raw cotton and phosphates turned down after rising in September. Conversely, the gold ores index increased 10.5 percent in October following a 6.0-percent decline in the prior month. Prices for copper ores fell less than in September, while the index for construction sand, gravel, and crushed stone rose more in October than it 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 dropped 3.4 percent after decreasing 0.5 percent in September. (Net output price indexes are not seasonally adjusted.) The industry index for petroleum refineries declined 22.6 percent in October after falling 0.9 percent a month earlier. Prices received by the industries for electric power distribution, crude petroleum and natural gas extraction, and livestock slaughtering also decreased more than in the prior month. Indexes for the phosphatic fertilizer and for the medicinal and botanical manufacturing industries, as well as, for potassium and sodium compounds (except bleaches, alkalies, and aluminum compounds) turned down after rising in September. By contrast, partially offsetting the faster rate of decline in the index for Total Mining, Utilities, and Manufacturing Industries, the rise in the index for automobile, light truck, and utility vehicle manufacturing accelerated to 7.6 percent in October from 0.1 percent in the preceding month. Prices received by the electric power generation industry turned up after declining in September. In October, the index for total mining, utilities, and manufacturing industries was 112.6 (December 2006 = 100), 7.5 percent above its year-ago level.

Trade Industries. The Producer Price Index for the Net Output of Total Trade Industries turned up 2.8 percent following a 1.2-percent decrease in September. (Trade indexes measure changes in margins received by wholesalers and retailers.) About half of the upturn can be accounted for by the margin index for gasoline stations with convenience stores, whose increase accelerated to 46.1 percent in October from 0.4 percent in the prior month. Margins received by merchant wholesalers of both nondurable and durable goods, fuel dealers, department stores, specialty food stores, and supermarkets and other grocery stores turned up after declining a month earlier. Conversely, the margin index for family clothing stores turned down 4.8 percent after rising 1.9 percent in September. In October, the index for total trade industries was 114.2 (December 2006 = 100), 8.7 percent above its year-ago level.

Transportation and Warehousing Industries. The decline in the Producer Price Index for the Net Output of Total Transportation and Warehousing Industries slowed to 0.4 percent in October from 0.9 percent in the prior month. The index for the general freight trucking industry sector fell 0.6 percent following a 2.3-percent decrease in September. Prices received by the scheduled air transportation industry group turned up after declining in the prior month. Conversely, the industry index for couriers turned down 3.1 percent in October after rising 0.1 percent a month earlier. Prices received by line-haul railroads also fell after climbing in September. The industry indexes for freight transportation arrangement and long distance specialized freight trucking of new goods decreased more than in the preceding month. Prices received by the industry for local specialized freight trucking of new goods declined in October after no change in the previous month, and the index for inland water freight transportation rose less than in September. In October, the index for total transportation and warehousing industries was 114.5 (December 2006 = 100), 8.4 percent above its year-ago level.

Traditional Service Industries. The Producer Price Index for the Net Output of Total Traditional Service Industries turned up 0.3 percent in October after falling 0.2 percent a month earlier. The index for non-casino hotels and motels increased 3.5 percent following a 6.4-percent drop in September. Prices received by software publishers and savings institutions also turned up after decreasing in the previous month. The indexes for investment banking and securities dealing and for general medical and surgical hospitals rose more than in September. Conversely, the advance in the index for commercial banking slowed to 0.1 percent in October from 1.3 percent in the prior month. Prices received by portfolio managers and by securities brokers decreased more than in September. In October, the index for total traditional service industries was 102.6 (December 2006 = 100), 0.4 percent above its year-ago level.

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

Effective with the release of January 2009 data on February 19, 2009, the Bureau of Labor Statistics will update the weight allocations used to calculate its stage-of-processing (SOP) indexes to more accurately reflect recent sales patterns. While PPI weights will continue to be based on shipment values from the 2002 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 2002 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.

Relative importance figures as of December 2008, will be available on February 17, 2009 on the BLS Web site at: www.bls.gov/ppi. Choose the "PPI Tables" link, under the "On This Page" heading. The revised SOP relative importance figures will be available through the links: "Component series by stage of processing" and "Commodity groupings by major stage of processing category." The information may also be requested from the Division of Industrial Prices and Price Indexes, Section of Index Analysis and Public Information, at 202-691-7705. For further information on this change, please contact Jon Weinhagen at (202) 691-7709.