December 2010 Producer Price Index

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The Producer Price Index for Finished Goods rose 1.1 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed increases of 0.8 percent in November and 0.4 percent in October and marks the sixth straight rise in finished goods prices. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 1.0 percent, and the crude goods index increased 4.0 percent. On an unadjusted basis, prices for finished goods advanced 4.0 percent in 2010 after climbing 4.3 percent in 2009. (See table A.)

Stage-of-Processing Analysis

Finished goods

About three-fourths of the December rise in the finished goods index can be traced to prices for energy goods, which increased 3.7 percent. Also contributing to the broad-based advance in the finished goods index, prices for consumer foods and for goods other than foods and energy moved up 0.8 percent and 0.2 percent, respectively.

Finished energy: The index for finished energy goods climbed 3.7 percent in December, its third consecutive monthly advance. Roughly sixty percent of the December rise is attributable to a 6.4-percent jump in gasoline prices. Increases in the indexes for home heating oil and liquefied petroleum gas also contributed to higher prices for finished energy goods. (See table 2.)

Finished foods: The index for finished consumer foods rose 0.8 percent in December after moving up 1.0 percent in November. Over three-fourths of the December advance can be linked to prices for fresh and dry vegetables, which surged 22.8 percent. Higher prices for meats also were a major factor in the increase in the finished consumer foods index.

Finished core: The index for finished goods less foods and energy moved up 0.2 percent in December following a 0.3-percent rise in November. Nearly sixty percent of the December increase can be traced to a 2.9-percent advance in cigarette prices.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components moved up 1.0 percent in December, its fifth consecutive monthly advance. Accounting for about two-thirds of the broad-based December increase, prices for intermediate energy goods rose 3.1 percent. The indexes for both intermediate materials less foods and energy and for intermediate foods and feeds also contributed to this advance, rising 0.4 percent and 0.6 percent, respectively. In 2010, prices for intermediate goods climbed 6.5 percent after increasing 2.9 percent in 2009. (See table B.)

Intermediate energy: The intermediate energy goods index increased 3.1 percent in December, its third consecutive advance of about 3 percent. Contributing significantly to the December rise, prices for diesel fuel jumped 8.6 percent. Increases in the indexes for gasoline and lubricating oil base stocks also were major factors in the advance in prices for intermediate energy goods. (See table 2.)

Intermediate core: The index for intermediate materials less foods and energy moved up 0.4 percent in December, its fifth consecutive monthly increase. About forty-five percent of the December advance can be attributed to a 4.9-percent rise in prices for primary basic organic chemicals. The index for nonferrous wire and cable also moved up, contributing to the increase in intermediate core prices.

Intermediate foods: Prices for intermediate foods and feeds rose 0.6 percent in December, their fifth consecutive monthly advance. Leading the December increase, the prepared animal feeds index moved up 2.9 percent.

Crude goods

The Producer Price Index for Crude Materials for Further Processing increased 4.0 percent in December. For the 3 months ended in December, crude goods prices advanced 9.0 percent following a 4.6-percent rise for the 3 months ended in September. Accounting for about seventy percent of the December monthly increase, the index for crude energy materials climbed 7.7 percent. Also contributing to this broad-based advance, prices for crude nonfood materials less energy and for crude foodstuffs and feedstuffs moved up 3.1 percent and 1.1 percent, respectively.

Crude energy: The index for crude energy materials jumped 7.7 percent in December. From September to December, crude energy prices advanced 12.0 percent after falling 4.2 percent for the 3 months ended in September. Almost ninety percent of the December monthly rise was the result of a 23.4-percent surge in the index for natural gas. Higher prices for crude petroleum and coal also were factors in the advance in the crude energy materials index.

Crude core: Prices for crude nonfood materials less energy moved up 3.1 percent in December. For the 3-month period ended in December the crude core index rose 8.6 percent, subsequent to a 7.6-percent increase from June to September. Accounting for over sixty percent of the December monthly advance, carbon steel scrap prices climbed 8.9 percent. An increase in the index for grains also contributed to higher crude core prices.

Crude foods: The index for crude foodstuffs and feedstuffs rose 1.1 percent in December. From September to December, crude foods prices moved up 6.1 percent after advancing 12.5 percent during the previous 3 months. Leading the December monthly increase, the index for slaughter livestock climbed 4.3 percent.

Services Analysis

Trade industries: The Producer Price Index for the Net Output of Total Trade Industries was unchanged in December after falling in each of the previous two months. (Trade indexes measure changes in margins received by wholesalers and retailers.) In December, higher margins received by department stores and merchant wholesalers of durable goods were offset by declining margins for merchant wholesalers of nondurable goods and gasoline stations. In 2010, the total trade industries index rose 1.1 percent.

Transportation and warehousing industries: The Producer Price Index for the Net Output of Transportation and Warehousing Industries moved up 0.2 percent in December, its third straight monthly advance. More than a third of the December increase can be traced to a 0.8-percent rise in prices received by couriers. Higher prices received by the industries for rail transportation and scheduled freight air transportation also were major factors in the advance in the transportation and warehousing industries index. In 2010, the total transportation and warehousing industries index moved up 3.8 percent.

Traditional service industries: The Producer Price Index for the Net Output of Total Traditional Service Industries edged down 0.1 percent in December following two consecutive monthly increases. Leading this decline, prices received by the depository credit intermediation industry group fell 1.7 percent. The industry group indexes for accommodation and for automotive equipment rental and leasing also contributed to the decrease in the total traditional service industries index. In 2010, the total traditional service industries index increased 2.1 percent.

Recalculated Seasonal Adjustment Factors and Relative Importance Figures to be Available on February 14, 2011

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 14, 2011 (2 workdays prior to the release of PPI data for January 2011 on February 16):

* Direct seasonal factors for commodity indexes for the year 2011,

* Recalculated seasonal factors for the last 5 years (2006-2010) for the commodity indexes,

* Recalculated seasonal factors for the last 5 years (2006-2010) for the stage-of-processing indexes.

In addition to recalculated seasonal factors, December 2010 relative importance figures also will be available on February 14, 2011.

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.