December 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 1.9 percent in December, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decrease followed a 2.2-percent decline in November and a 2.8-percent drop in October. At the earlier stages of processing, prices received by producers of intermediate goods fell 4.2 percent in December after decreasing 4.3 percent in the prior month, and the crude goods index declined 5.3 percent following a 12.5-percent drop in November. (See table A.)

The slower rate of decrease in finished goods prices was led by the index for energy goods, which fell 9.3 percent in December after declining 11.2 percent in November. Prices for finished goods other than foods and energy rose 0.2 percent in December compared with a 0.1- percent increase in the preceding month. By contrast, partially offsetting the slower rate of decline in the finished goods index, prices for consumer foods moved down 1.5 percent following no change in November.

Before seasonal adjustment, the Producer Price Index for Finished Goods decreased 1.9 percent in December to 168.8 (1982 = 100). In 2008, finished goods prices fell 0.9 percent compared with a 6.2-percent advance in 2007. The 2008 downturn is mostly attributable to energy prices, which dropped 20.3 percent after rising 17.8 percent a year earlier. Price increases for finished consumer foods slowed to 3.7 percent in 2008 from 7.6 percent in 2007. Conversely, the index for finished goods other than foods and energy advanced 4.3 percent in 2008 following a 2.0-percent gain in the preceding year. At the earlier stages of processing, prices received by manufacturers of intermediate goods fell 1.7 percent in 2008 after rising 7.1 percent in the prior year, and the crude goods index dropped 25.0 percent following a 19.8- percent jump in 2007. (See summary table.)

Finished goods

The index for finished energy goods fell 9.3 percent in December after decreasing 11.2 percent in November. Prices for liquefied petroleum gas moved down 21.8 percent in December following a 33.4-percent drop a month earlier. The index for residential natural gas also declined less than it had in November, and prices for finished lubricants turned up in December. By contrast, partially counteracting the slower rate of decrease in the index for finished energy goods, prices for residential electric power increased 0.3 percent compared with a 1.4-percent advance in November. The indexes for kerosene, home heating oil, and diesel fuel fell more than in the prior month. Gasoline prices decreased 25.7 percent for the second consecutive month. (See table 2.)

The index for finished goods other than foods and energy increased 0.2 percent in December after edging up 0.1 percent in November. In December, higher prices for passenger cars, pharmaceutical preparations, light motor trucks, and civilian aircraft outweighed lower prices for consumer plastic products; storage units, files, and tables; alcoholic beverages; and power and distribution transformers.

The index for finished consumer foods declined 1.5 percent in December after no change in November. Prices for fresh and dry vegetables dropped 14.9 percent compared with a 3.8- percent rise in the preceding month. The indexes for beef and veal, packaged fluid milk, and canned fruits and juices also turned down in December. Prices for citrus fruits increased less than in November, and the index for chewing gum was unchanged after rising in the previous month. By contrast, prices for natural cheese (except cottage) advanced 3.4 percent in December following a 5.0-percent decline in the prior month. The index for noncarbonated soft drinks also turned up after decreasing a month earlier. Prices for pork and eggs for fresh use fell less than they had in November.

Intermediate goods

Following a 4.3-percent drop in November, the Producer Price Index for Intermediate Materials, Supplies, and Components fell 4.2 percent in December. This decrease was broad based, with prices for energy goods, materials for both nondurable and durable manufacturing, materials and components for construction, and foods and feeds all declining in December. The index for intermediate goods excluding foods and energy posted a record decline for the third straight month in December - 3.0 percent. This index fell 2.3 percent in November and 1.7 percent in October. (See table B.)

The index for intermediate energy goods decreased 9.5 percent in December following a 12.3-percent drop in November. Price declines for utility natural gas slowed in December to 1.6 percent from 4.9 percent in the prior month. The indexes for residual fuel and liquefied petroleum gas also fell less than they had in November. Prices for industrial electric power and finished lubricants turned up in December. By contrast, partially offsetting the slower rate of decrease in the intermediate energy goods index, jet fuel prices declined 16.8 percent after moving down 11.6 percent in November. The indexes for diesel fuel and kerosene also fell more in December than they had in the previous month. Prices for commercial electric power rose less than in November. (See table 2.) The index for intermediate energy goods decreased 19.8 percent in 2008 after increasing at the same rate in 2007.

The index for materials for nondurable manufacturing dropped 9.1 percent in December following an 8.5-percent decline in November. In December, lower prices for basic organic chemicals, plastic resins and materials, phosphates, rubber and rubber products, inedible fats and oils, processed yarns and threads, and surface active agents outweighed higher prices for basic inorganic chemicals and knit gray fabrics. The index for materials for nondurable manufacturing decreased 3.6 percent in 2008 after climbing 12.8 percent in 2007.

The index for materials for durable manufacturing fell 7.2 percent in December following a 6.2-percent decline in November. Prices for cold rolled steel sheet and strip dropped 16.6 percent in December after moving down 5.4 percent a month earlier. The indexes for hot rolled steel sheet and strip, plastic resins and materials, basic organic chemicals, semifinished steel mill products, and cold finished steel bars also decreased more than they had in November. Conversely, price declines for nonferrous wire and cable slowed to 2.9 percent in December from 10.8 percent in the preceding month. The indexes for primary nonferrous metals; hot rolled steel bars, plates, and structural shapes; and copper and brass mill shapes also fell less than they had in November. Prices for materials for durable manufacturing decreased 5.5 percent in 2008 following a 1.7-percent advance in 2007.

The index for materials and components for construction declined 1.2 percent in December after decreasing 1.1 percent in November. In December, lower prices for steel mill products, paving mixtures and blocks, plastic construction products, nonferrous wire and cable, fabricated structural metal, prefabricated wood buildings and components, and sheet metal products outweighed higher prices for architectural coatings and millwork. The index for materials and components for construction rose 7.3 percent in 2008 following a 2.0-percent increase in 2007.

Prices for intermediate foods and feeds fell 3.4 percent in December after declining 2.4 percent in November. The index for corn, cottonseed, and soybean cake and meal decreased 1.8 percent following a 9.1-percent advance in November. Prices for beef and veal and for packaged fluid milk and related products also turned down in December. The indexes for processed eggs, bulk fluid milk and cream, shortening and cooking oils, and flour fell more in December than they had in the prior month. Conversely, price declines for formula feeds slowed to 4.7 percent in December from 9.3 percent in November. The index for pork also decreased less than it had in the previous month, while prices for natural cheese (except cottage cheese) turned up in December. Prices for intermediate foods and feeds increased 3.4 percent in 2008 after climbing 17.2 percent in 2007.

Crude goods

The Producer Price Index for Crude Materials for Further Processing fell 5.3 percent in December after declining 12.5 percent in November. Prices for crude energy materials and crude nonfood materials less energy decreased less than they had in November. Conversely, partially offsetting the slower rate of decline in crude materials prices, the index for crude foodstuffs and feedstuffs fell at a faster rate compared with the prior month. (See table B.)

The index for crude energy materials decreased 6.0 percent in December after dropping 18.7 percent a month earlier. Coal prices edged down 0.3 percent subsequent to a 0.5-percent decline in November. Prices for natural gas advanced 14.7 percent in December following a 10.9-percent decrease in the previous month. By contrast, the crude petroleum index moved down 31.0 percent after falling 30.2 percent in the prior month. (See table 2.) In 2008, prices for crude energy materials declined 33.5 percent following a 16.2-percent advance in 2007.

The crude nonfood materials less energy index declined 2.2 percent in December subsequent to a 20.4-percent drop a month earlier. Nonferrous scrap prices moved down 9.2 percent following a 25.4-percent decrease in November. The indexes for iron and steel scrap, wastepaper, gold ores, and plant and animal fibers turned up after declining in the prior month. By contrast, the phosphates index moved down 21.6 percent in December following a 7.6- percent decrease a month earlier. Prices for hides and skins also fell at faster rates compared with the previous month, and the index for soybeans turned down in December. The crude nonfood materials less energy index declined 24.3 percent in 2008 compared with a 15.6-percent gain in 2007.

Prices for crude foodstuffs and feedstuffs decreased 5.3 percent in December after moving down 1.2 percent in the preceding month. Leading this faster rate of decline, the slaughter cattle index fell 8.9 percent following a 2.4-percent increase in November. Prices for fresh vegetables (except potatoes) and soybeans also turned down in December. The indexes for fluid milk, corn, and wheat declined more than they had a month earlier. By contrast, prices for slaughter hogs advanced 4.6 percent after moving down 15.8 percent in November. The index for slaughter chickens rose more than it had a month earlier. Prices for Irish potatoes for processing increased following no change in the prior month, and the index for slaughter turkeys fell less than it had in November. In 2008, crude foodstuffs and feedstuffs prices moved down 14.3 percent following a 24.9-percent jump in 2007.

Net output price indexes

Mining, Utilities, and Manufacturing Industries. The decline in the Producer Price Index for the Net Output of Total Mining, Utilities, and Manufacturing Industries slowed to 2.8 percent from 4.0 percent in November. (Net output price indexes are not seasonally adjusted.) The index for the electric power generation, transmission, and distribution industry group fell 0.2 percent in December after moving down 2.8 percent a month earlier. Prices received by petroleum refineries and farm-feed manufacturers also decreased less than in November. The industry indexes for automobile, light truck, and utility vehicle manufacturing and for natural gas liquid extraction turned up after falling in the prior month. Prices received by pharmaceutical preparation manufacturers moved up more than in November. Conversely, partially offsetting the slower rate of decline in the total mining, utilities, and manufacturing industries index, prices received by phosphatic fertilizer manufacturers dropped 23.1 percent in December following a 6.5-percent decrease in the preceding month. The index for the fluid milk manufacturing industry turned down after rising in November. In December, the index for total mining, utilities, and manufacturing industries was 105.1 (December 2006 = 100). In 2008, the total mining, utilities, and manufacturing industries index fell 1.0 percent after rising 6.2 percent in 2007.

Trade Industries. The Producer Price Index for the Net Output of Total Trade Industries turned up 0.5 percent in December after decreasing 3.2 percent a month earlier. (Trade indexes measure changes in margins received by wholesalers and retailers.) The margin index for gasoline stations with convenience stores increased 8.9 percent following a 53.4-percent drop in November. Margins received by merchant wholesalers of durable goods, non-discount department stores, fuel dealers, and family clothing stores also turned up after falling in the preceding month. The margin index for merchant wholesalers of nondurable goods increased more than in November. By contrast, the margin index for supermarkets turned down 2.1 percent in December after rising 4.8 percent in the prior month. Margins received by electronic shopping and mail-order houses also fell following advances in November. In December, the index for total trade industries was 111.1 (December 2006 = 100). In 2008, the total trade industries index rose 6.9 percent after increasing 3.9 percent in 2007.

Transportation and Warehousing Industries. The Producer Price Index for the Net Output of Total Transportation and Warehousing Industries fell 2.8 percent in December after decreasing 1.7 percent in the previous month. The industry index for couriers dropped 5.5 percent following no change in November. Prices received by scheduled air transporters, line-haul railroads, and local specialized freight truckers of new goods fell more than in the preceding month. The industry index for Coastal and Great Lakes freight transportation turned down after advancing in November. By contrast, the decline in the industry index for long distance specialized freight trucking of new goods slowed to 0.7 percent in December from 2.8 percent in the prior month. Prices received by long distance general freight truckers (less than truckload) also fell less than in November, and the industry index for deep sea freight transportation was unchanged after decreasing in the prior month. In December, the index for total transportation and warehousing industries was 109.5 (December 2006 = 100). In 2008, the total transportation and warehousing industries index increased 2.7 percent following a 6.6-percent rise in 2007.

Total Traditional Service Industries. The Producer Price Index for the Net Output of Total Traditional Service Industries turned down 0.8 percent in December after rising 0.1 percent in the prior month. The index for the commercial banking industry decreased 6.5 percent following a 2.8-percent advance in November. Prices received by securities brokers, software publishers, television broadcasters, and casino hotels also turned down after rising in the preceding month. Conversely, the industry index for lessors of nonresidential buildings turned up 0.7 percent in December after decreasing 2.0 percent a month earlier. Prices received by cellular and other wireless carriers and by general medical and surgical hospitals also increased after November declines. In December, the index for total traditional services industries was 101.9 (December 2006 = 100). In 2008, the total traditional services industries index inched up 0.1 percent after increasing 1.8 percent in 2007.

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.

Recalculated Seasonal Adjustment Factors and Relative Importance Figures to be Available on February 17, 2009

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 17, 2009 (2 workdays prior to the release of PPI data for January 2009 on February 19):

* Direct seasonal factors for commodity indexes for the year 2009,

* Recalculated seasonal factors for the last 5 years (2004-2008) for the commodity indexes,

* Recalculated seasonal factors for the last 5 years (2004-2008) for the stage-of-processing indexes.

In addition to recalculated seasonal factors, December 2008 relative importance figures also will be available on February 17, 2009.

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