October 2010 Producer Price Index

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The Producer Price Index for Finished Goods increased 0.4 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed a 0.4- percent rise in both September and August. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 1.2 percent in October, and the crude goods index increased 4.3 percent. On an unadjusted basis, prices for finished goods advanced 4.3 percent for the 12 months ended October 2010, their largest year-over-year gain since a 5.1- percent rise in May 2010. (See table A.)

Stage-of-Processing Analysis

Finished goods

In October, the increase in the index for finished goods can be traced to prices for finished energy goods, which moved up 3.7 percent. By contrast, the indexes for both finished goods less foods and energy and for finished consumer foods decreased, falling 0.6 percent and 0.1 percent, respectively.

Finished energy: Prices for finished energy goods advanced 3.7 percent in October, their third consecutive monthly increase. Over ninety percent of the October rise can be attributed to the index for gasoline, which moved up 9.8 percent. Higher prices for liquefied petroleum gas and home heating oil also contributed to the advance in the index for finished energy goods. (See table 2.)

Finished core: The index for finished goods less foods and energy fell 0.6 percent in October after increasing in each of the prior eleven months. Lower prices for light motor trucks and passenger cars led the October decline, falling 4.3 percent and 3.0 percent, respectively. (On a not seasonally adjusted basis, the indexes for light motor trucks and passenger cars advanced 2.7 percent and 1.3 percent, respectively.) 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 2011 Model Vehicles, at www.bls.gov/ppi/ppimotveh2011.htm).

Finished foods: In October, prices for finished consumer foods edged down 0.1 percent after increasing 1.2 percent in September. A majority of this decrease can be traced to the index for fresh and dry vegetables, which declined 8.1 percent.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components increased 1.2 percent in October, its third straight monthly advance. The October rise in the intermediate goods index was broad based, with energy prices climbing 3.2 percent, the index for intermediate materials less foods and energy increasing 0.6 percent, and prices for foods and feeds moving up 1.3 percent. On a 12-month basis, the index for intermediate goods climbed 6.4 percent in October, its eleventh consecutive year-over-year increase. (See table B.)

Intermediate energy: The index for intermediate energy goods advanced 3.2 percent in October, its third consecutive monthly increase. A major factor in the October rise was jet fuel prices, which jumped 9.3 percent. Increases in the indexes for gasoline and diesel fuel also contributed significantly to higher intermediate energy goods prices. (See table 2.)

Intermediate core: Prices for intermediate materials less foods and energy climbed 0.6 percent in October, their largest rise since a 1.1-percent jump in April. About a quarter of the October increase can be traced to the basic organic chemicals index, which moved up 1.7 percent. Higher prices for plastic resins and materials also contributed to the advance in the intermediate core index.

Intermediate foods: The index for intermediate foods and feeds rose 1.3 percent in October, its fourth consecutive monthly increase. Seventy percent of the October advance can be linked to prices for prepared animal feeds, which climbed 7.1 percent.

Crude goods

The Producer Price Index for Crude Materials for Further Processing rose 4.3 percent in October. For the 3 months ended in October, crude goods prices increased 6.2 percent following a 2.6- percent decline for the 3 months ended in July. In October, nearly half of the monthly advance is attributable to the index for crude energy materials, which climbed 5.4 percent. Also contributing to the broad-based rise in crude goods prices, the indexes for crude foodstuffs and feedstuffs and for crude nonfood materials less energy moved up 4.2 percent and 2.1 percent, respectively. (See table B.)

Crude energy: The index for crude energy materials increased 5.4 percent in October. From July to October, prices for crude energy materials decreased 3.4 percent after moving up 0.8 percent from April to July. About eighty percent of October's monthly advance can be traced to an 8.7-percent jump in the index for crude petroleum. Higher prices for natural gas and coal also contributed to the rise in the index for crude energy materials. (See table 2.)

Crude foods: The index for crude foodstuffs and feedstuffs increased 4.2 percent in October. For the 3 months ended in October, prices for crude foodstuffs and feedstuffs climbed 13.3 percent following a 2.8-percent decline for the 3 months ended in July. Over sixty percent of the monthly rise in October can be linked to a 22.7-percent surge in the corn index. Higher soybean prices also were a major factor in the advance in the index for crude foods.

Crude core: The index for crude nonfood materials less energy moved up 2.1 percent in October. From July to October, crude core prices jumped 12.2 percent after falling 7.6 percent during the prior 3 months. In October, a 6.6-percent monthly rise in prices for nonferrous metal ores was a significant factor in the advance in the crude core index. Higher prices for corn also were a key contributor to this increase.

Services Analysis

Trade Industries: The Producer Price Index for the Net Output of Total Trade Industries moved down 0.4 percent in October following two consecutive monthly increases. (Trade indexes measure changes in margins received by wholesalers and retailers.) Leading this decrease, the index for merchant wholesalers of nondurable goods fell 2.9 percent. Lower margins received by family clothing stores and non-discount department stores also contributed to the decline in the total trade industries index.

Transportation and warehousing industries: The Producer Price Index for the Net Output of Transportation and Warehousing Industries rose 1.2 percent in October after declining 1.4 percent a month earlier. Over half of this increase can be traced to a 4.2-percent gain in prices received by the scheduled passenger air transportation industry. Advances in the indexes for pipeline transportation of crude oil and long distance general freight trucking also were factors in the rise 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 October, its seventh straight monthly advance. Leading the October increase, prices received by the portfolio management industry moved up 5.2 percent. Higher prices received by general medical and surgical hospitals and by offices of physicians also contributed to the rise in the total traditional service industries index.