February 2010 Producer Price Index

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The Producer Price Index for Finished Goods declined 0.6 percent in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This decrease followed a 1.4- percent advance in January and a 0.4-percent increase in December. At the earlier stages of processing, prices received by producers of intermediate goods moved up 0.1 percent and the crude goods index fell 3.5 percent. On an unadjusted basis, prices for finished goods advanced 4.4 percent for the 12 months ended February 2010, their fourth consecutive 12-month increase. (See table A.)

Stage-of-Processing Analysis

Finished goods

In February, the decrease in the index for finished goods was driven by lower prices for energy goods, which declined 2.9 percent. By contrast, prices for finished consumer foods rose 0.4 percent and the index for finished goods less foods and energy inched up 0.1 percent.

Finished energy: Prices for finished energy goods decreased 2.9 percent in February after advancing in each of the previous four months. About ninety percent of the February decline can be attributed to the gasoline index, which fell 7.4 percent. Lower prices for home heating oil and liquefied petroleum gas also were factors in the finished energy goods decrease. (See table 2.)

Finished foods: Prices for finished consumer foods rose 0.4 percent in February, their fifth straight monthly advance. Leading the February increase, the index for fresh and dry vegetables rose 5.3 percent. Higher prices for eggs for fresh use also contributed to the rise in the finished consumer foods index.

Finished core: The index for finished goods less foods and energy moved up 0.1 percent in February, its second consecutive monthly increase. A major contributor to the February advance was the index for passenger cars, which rose 0.5 percent.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components inched up 0.1 percent in February, its fifth straight monthly advance. Accounting for the February increase, prices for intermediate materials other than foods and energy climbed 0.9 percent. By contrast, the indexes for intermediate energy goods and for intermediate foods and feeds fell 2.7 percent and 0.4 percent, respectively. On a 12-month basis, prices for intermediate goods climbed 5.6 percent, the third consecutive month of year-over-year increases. (See table B.)

Intermediate core: The index for intermediate materials less foods and energy moved up 0.9 percent in February, its ninth consecutive monthly rise. A major factor in the February increase was a 7.3-percent jump in prices for primary basic organic chemicals. Higher prices for steel mill products and for plastic resins and materials also were factors in the intermediate core advance. (See table 2.)

Intermediate energy: The index for intermediate energy goods fell 2.7 percent in February, after rising during each of the prior four months. A major factor in this decline was diesel fuel prices, which dropped 8.1 percent. A falling gasoline index was also a significant factor in the intermediate energy goods decrease.

Intermediate foods: Prices for intermediate foods and feeds moved down 0.4 percent in February, their second straight monthly decline. The index for prepared animal feeds led the February decrease, falling 4.0 percent.

Crude goods

The Producer Price Index for Crude Materials for Further Processing declined 3.5 percent in February. For the 3-month period ending in February, crude material prices moved up 6.5 percent, compared with a 9.1-percent gain for the 3 months ended November 2009. In February, about seventy percent of the broad-based monthly decrease is attributable to a 6.4-percent fall in prices for crude energy materials. Also contributing to the February decline, the index for crude foodstuffs and feedstuffs decreased 1.4 percent and prices for crude nonfood materials less energy fell 0.6 percent. (See table B.)

Crude energy: The index for crude energy materials moved down 6.4 percent in February. From November to February, crude energy prices rose 6.4 percent, subsequent to a 15.1-percent gain for the 3 months ended November 2009. Over half of the monthly decline in February was driven by an 8.7-percent drop in crude petroleum prices. Lower prices for natural gas and coal also contributed to the decrease in the crude energy materials index. (See table 2.)

Crude foods: The index for crude foodstuffs and feedstuffs fell 1.4 percent in February. For the 3 months ending in February, prices for crude foodstuffs and feedstuffs moved up 5.0 percent, following a 5.7-percent advance in the previous 3-month period. Roughly two-thirds of February's monthly decrease can be traced to an 11.6-percent drop in the index for slaughter barrows and gilts. Lower prices for grains also were a factor in the February decrease for the crude foodstuffs and feedstuffs index.

Crude core: The index for crude nonfood materials less energy moved down 0.6 percent in February. From November to February, crude core prices rose 10.7 percent after increasing 3.2 percent for the 3 months ended November 2009. Leading February's monthly decline was a 3.6- percent decrease in prices for nonferrous metals.

Services Analysis

Trade industries: The Producer Price Index for the Net Output of Total Trade Industries advanced 2.6 percent in February following two consecutive declines. (Trade indexes measure changes in margins received by wholesalers and retailers.) About one-third of this rise can be traced to a 34.4-percent jump in margins received by discount department stores. Higher margins received by wholesale trade industries and by supermarkets also contributed significantly to the increase in the total trade industries index.

Transportation and warehousing industries: The Producer Price Index for the Net Output of Transportation and Warehousing Industries moved down 0.4 percent in February, its first decline since September 2009. Most of the decrease can be attributed to a 3.2-percent drop in prices received by the scheduled passenger air transportation industry. Lower prices received by the industry for long distance general freight trucking (by the truckload), as well as by the specialized freight trucking industry group, also were factors in the February decrease in the transportation and warehousing industries index.

Traditional service industries: The Producer Price Index for the Net Output of Total Traditional Service Industries inched up 0.1 percent in February, its tenth advance in the last 11 months. Leading the February rise, prices received by direct life, health, and medical insurance carriers climbed 0.7 percent. Higher prices received by general medical and surgical hospitals and by non-casino hotels and motels also contributed to the February increase in the total traditional service industries index.