May 2011 Producer Price Index

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The Producer Price Index for finished goods rose 0.2 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed increases of 0.8 percent in April and 0.7 percent in March. At the earlier stages of processing, prices received by manufacturers of intermediate goods climbed 0.9 percent in May, and the crude goods index declined 4.1 percent. On an unadjusted basis, prices for finished goods moved up 7.3 percent for the 12 months ended May 2011, the largest year-over-year gain since an 8.8-percent advance in September 2008. (See table A.)

Stage of Processing Analysis

Finished goods

The May advance in the finished goods index can be traced primarily to prices for finished energy goods, which rose 1.5 percent. The index for finished goods less foods and energy moved up 0.2 percent. By contrast, prices for finished consumer foods fell 1.4 percent in May.

Finished energy: The index for finished energy goods increased 1.5 percent in May, the eighth straight monthly advance. Prices for gasoline moved up 2.7 percent and accounted for about three-quarters of the May rise. Increases in the indexes for residential electric power and finished lubricants also were major factors in the advance in finished energy goods prices. (See table 2.)

Finished core: The index for finished goods less foods and energy moved up 0.2 percent in May, the sixth consecutive rise. A 1.2-percent increase in prices for plastic products led the May advance. Higher prices for converted paper and paperboard products also contributed to the rise in the finished core index.

Finished foods: The index for finished consumer foods fell 1.4 percent in May, the largest decrease since a 2.4-percent drop in June 2010. Almost forty percent of the May decline can be attributed to prices for fresh and dry vegetables, which moved down 12.2 percent.

Intermediate goods

The Producer Price Index for intermediate materials, supplies, and components moved up 0.9 percent in May, the tenth consecutive monthly increase. About two-thirds of the May rise can be traced to a 0.9-percent advance in prices for intermediate goods other than foods and energy. A 1.4-percent jump in the index for intermediate energy goods also contributed to the increase in intermediate goods prices. By contrast, the index for intermediate foods and feeds moved down 0.4 percent in May. For the 12 months ended May 2011, intermediate goods prices rose 10.3 percent, the largest gain since a 15.3-percent jump for the 12 months ended September 2008. (See table B.)

Intermediate core: Prices for intermediate goods other than foods and energy moved up 0.9 percent in May, the tenth straight monthly rise. Over half of the May increase can be attributed to the index for industrial chemicals, which climbed 4.1 percent. Higher prices for plastic products and for processed yarns and threads also were factors in the advance in the intermediate core index. (See table 2.)

Intermediate energy: The index for intermediate energy goods advanced 1.4 percent in May, the smallest rise since a 0.4-percent increase in September 2010. Jet fuel prices, which climbed 3.6 percent, were a major contributor to the May advance. Higher prices for gasoline and asphalt also were significant factors in the increase in the intermediate energy goods index.

Intermediate foods: The index for intermediate foods and feeds fell 0.4 percent in May, the first decline since July 2010. Leading the May decrease, meat prices dropped 3.2 percent.

Crude goods

The Producer Price Index for crude materials for further processing decreased 4.1 percent in May. For the 3-month period ending in May, crude materials prices moved down 0.8 percent following a 13.6-percent increase from November to February. In May, about half of the broad- based monthly decline can be attributed to a 5.2-percent drop in the index for crude energy materials. Also contributing to the May decrease, prices for crude foodstuffs and feedstuffs fell 4.4 percent and the index for crude nonfood materials less energy moved down 0.9 percent. (See table B.)

Crude energy: The index for crude energy materials declined 5.2 percent in May. From February to May, prices for crude energy materials fell 1.2 percent subsequent to a 17.0-percent increase for the 3 months ending in February. The monthly decrease was the result of a 10.9- percent drop in crude petroleum prices. (See table 2.)

Crude foods: The index for crude foodstuffs and feedstuffs decreased 4.4 percent in May. From February to May, prices for crude foodstuffs and feedstuffs edged down 0.3 percent following a 12.2-percent rise in the previous 3-month period. Over thirty percent of the monthly decline in prices for crude foodstuffs and feedstuffs can be traced to a 5.8-percent decrease in the index for slaughter steers and heifers. Lower prices for slaughter hogs also contributed to the fall in the crude foodstuffs and feedstuffs index.

Crude core: The index for crude nonfood materials less energy moved down 0.9 percent in May. For the 3-month period ending in May, crude core prices decreased 0.7 percent after advancing 10.0 percent from November to February. A major contributor to the monthly decline was the index for copper base scrap, which fell 4.7 percent. A decrease in the index for corn also was a significant factor in the crude core decline.

Services Analysis

Trade industries: The Producer Price Index for the net output of total trade industries moved up 1.6 percent in May, the largest increase since a 2.2-percent rise in January 2007. (Trade indexes measure changes in margins received by wholesalers and retailers.) Over sixty percent of the May advance can be traced to a 2.4-percent rise in margins received by wholesale trade industries. Higher margins received by gasoline stations and non-discount department stores also contributed 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 up 0.4 percent in May, the eighth straight advance. Leading the May increase was a 2.4-percent rise in prices received by line-haul railroads. Advances in the indexes for the U.S. Postal Service and for couriers also were factors in the May rise in the transportation and warehousing industries index.

Traditional service industries: The Producer Price Index for the net output of total traditional service industries declined 0.2 percent in May following a 0.7-percent increase in April. Leading this decrease, prices received by the depository credit intermediation industry group fell 4.5 percent. Declines in the indexes for automotive equipment rental and leasing and for direct life insurance carriers also contributed to the drop in the total traditional service industries index.