February 2012 Producer Price Index

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The Producer Price Index for finished goods advanced 0.4 percent in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Finished goods prices rose 0.1 percent in January and decreased 0.1 percent in December. At the earlier stages of processing, the index for intermediate goods moved up 0.7 percent and crude goods prices increased 0.4 percent. On an unadjusted basis, the finished goods index rose 3.3 percent for the 12 months ended February 2012, the smallest year-over-year rise since a similar 3.3-percent advance in August 2010. (See table A.)

Stage-of-Processing Analysis

Finished goods

In February, the increase in finished goods prices was led by the index for finished energy goods, which moved up 1.3 percent. Prices for finished goods less foods and energy rose 0.2 percent. By contrast, the finished consumer foods index edged down 0.1 percent.

Finished energy: Prices for finished energy goods advanced 1.3 percent in February after declining in each of the previous two months. A 4.3-percent jump in the gasoline index accounted for most of the increase. Advances in the indexes for residential electric power and home heating oil also contributed to the rise 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 February, the third straight monthly increase. A third of the February rise can be traced to a 0.6- percent advance in prices for pharmaceutical preparations. An increase in the index for civilian aircraft also contributed to higher finished core prices.

Finished foods: In February, the finished consumer foods index inched down 0.1 percent, the third consecutive monthly decrease. A 2.8-percent drop in prices for dairy products led the February decline in the finished consumer foods index.

Intermediate goods

The Producer Price Index for intermediate materials, supplies, and components moved up 0.7 percent in February following a 0.4-percent decline in January. Most of this advance can be attributed to higher prices for intermediate materials less foods and energy, which climbed 1.0 percent. The index for intermediate energy goods rose 0.3 percent. By contrast, prices for intermediate foods and feeds edged down 0.1 percent. For the 12 months ended in February, the intermediate goods index advanced 3.3 percent, the smallest year-over-year increase since a 2.9- percent rise in December 2009. (See table B.)

Intermediate core: The index for intermediate goods less foods and energy moved up 1.0 percent in February after four consecutive declines. Sixty percent of this increase can be traced to the index for basic organic chemicals, which jumped 6.4 percent. Higher prices for nonferrous mill shapes and prepared paint also contributed to the advance in the intermediate core index. (See table 2.)

Intermediate energy: Prices for intermediate energy goods advanced 0.3 percent in February after declining 1.4 percent a month earlier. A major factor in this rise was the index for diesel fuel, which increased 4.1 percent. Higher gasoline prices also contributed significantly to the advance in the intermediate energy goods index.

Intermediate foods: Prices for intermediate foods and feeds edged down 0.1 percent in February, the third straight monthly decrease. A 1.6-percent drop in prices for meats was a significant contributor to the February decline. Lower prices for dairy products also were a major factor in the decrease in the intermediate foods index.

Crude goods

The Producer Price Index for crude materials for further processing advanced 0.4 percent in February. For the 3 months ending in February, crude goods prices moved up 0.4 percent compared with a 2.3-percent increase for the 3 months ending in November. On a monthly basis, the February index for crude foodstuffs and feedstuffs climbed 0.6 percent, and prices for crude energy materials moved up 0.3 percent. By contrast, the index for crude nonfood materials less energy declined 0.3 percent. (See table B.)

Crude foods: The index for crude foodstuffs and feedstuffs increased 0.6 percent in February. From November to February, prices for crude foodstuffs and feedstuffs fell 0.4 percent, compared with a 1.6-percent decrease from August to November. Leading the monthly rise in February was the slaughter cattle index, which climbed 5.4 percent. Higher prices for slaughter poultry and soybeans also were factors in the advance in the crude foods index. (See table 2.)

Crude energy: The Producer Price Index for crude energy materials moved up 0.3 percent in February. For the 3 months ending in February, prices for crude energy materials increased 0.9 percent following an 11.2-percent jump in the previous 3-month period. The February advance in the crude energy materials index is attributable to prices for crude petroleum, which rose 5.4 percent.

Crude core: The index for crude nonfood materials less energy fell 0.3 percent in February. From November to February, crude core prices inched up 0.2 percent after decreasing 5.7 percent from August to November. In February, most of the monthly decline can be traced to a 6.4- percent drop in the index for carbon steel scrap. Lower corn prices also contributed to the decrease in the crude core index.

Services Analysis

Trade industries: The Producer Price Index for the net output of total trade industries edged down 0.1 percent in February after no change in the prior month. (Trade indexes measure changes in margins received by wholesalers and retailers.) Leading the February decline was an 11.7-percent decrease in margins received by discount department stores. Lower margins received by merchant wholesalers of durable goods and by electronic shopping and mail-order houses also contributed significantly to the decrease 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 February, the third consecutive increase. Almost half of the February gain can be attributed to a 2.3-percent advance in prices received by the U.S. Postal Service. Higher prices received for long-distance general freight trucking and by line-haul railroads also were factors in the February increase in the transportation and warehousing industries index.

Traditional service industries: The Producer Price Index for the net output of total traditional service industries rose 0.2 percent in February subsequent to a 0.4-percent advance a month earlier. Accounting for thirty percent of the February increase, prices received by portfolio managers climbed 2.2 percent. Higher prices received by investment bankers and securities dealers and by non-casino hotels and motels also contributed to the February increase in the total traditional service industries index.