August 2013 Producer Price Index

Historical release narrative reproduced from the official public-domain source. Statistical tables, standard technical appendices, administrative material and attendance rosters are omitted; formatting is adapted for reading. Figures retain the release's historical context and may have been revised. Consult the linked source for the complete document.

The Producer Price Index for finished goods rose 0.3 percent in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods were unchanged in July and increased 0.8 percent in June. At the earlier stages of processing, prices received by producers of intermediate goods were unchanged in August, and the crude goods index fell 2.7 percent. On an unadjusted basis, prices for finished goods moved up 1.4 percent for the 12 months ended in August, the smallest advance since a 0.5-percent rise in April 2013. (See table A.)

Stage-of-Processing Analysis

Finished goods

In August, nearly two-thirds of the 0.3-percent increase in the finished goods index is attributable to a 0.8-percent rise in prices for finished energy goods. Also contributing to the advance, the index for finished consumer foods climbed 0.6 percent. Prices for finished goods less foods and energy were unchanged in August.

Finished energy: The index for finished energy goods moved up 0.8 percent in August after declining 0.2 percent in the previous month. Most of the advance can be traced to gasoline prices, which climbed 2.6 percent. Higher prices for liquefied petroleum gas and residential electric power also contributed to the rise in the index for finished energy goods. (See table 2.)

Finished foods: Prices for finished consumer foods increased 0.6 percent in August following no change in July. Leading the advance, the index for fresh and dry vegetables surged 26.9 percent.

Finished core: The index for finished goods less foods and energy was unchanged in August after nine consecutive increases. In August, higher prices for pet food and nonwood commercial furniture offset lower prices for motor vehicles.

Intermediate goods

The Producer Price Index for intermediate materials, supplies, and components was unchanged in both August and July. In August, a 0.6-percent increase in prices for intermediate energy goods and a 0.2-percent rise in the index for intermediate materials less foods and energy offset a 2.3-percent decline in prices for intermediate foods and feeds. (See table B.)

Intermediate energy: The index for intermediate energy goods rose 0.6 percent in August, the fourth consecutive increase. A major factor in the August advance was jet fuel prices, which climbed 4.5 percent. Increases in the indexes for gasoline and commercial electric power also contributed significantly to higher intermediate energy goods prices. (See table 2.)

Intermediate core: Prices for intermediate materials less foods and energy moved up 0.2 percent in August after a 0.3-percent decline a month earlier. Nearly eighty percent of the increase can be attributed to the index for primary basic organic chemicals, which rose 2.9 percent.

Intermediate foods: Prices for intermediate foods and feeds fell 2.3 percent in August following three straight advances. Three-quarters of the decline can be traced to the index for prepared animal feeds, which dropped 7.0 percent. Lower prices for meats and for refined sugar and byproducts also were factors in the decrease in the intermediate foods and feeds index.

Crude goods

The Producer Price Index for crude materials for further processing declined 2.7 percent in August. For the 3 months ended in August, crude goods prices moved down 1.4 percent subsequent to a 0.3-percent decrease for the 3 months ended in May. The broad-based monthly decline in August was led by the index for crude foodstuffs and feedstuffs, which dropped 4.2 percent. Prices for crude energy materials and crude nonfood materials less energy fell 2.7 percent and 0.4 percent, respectively. (See table B.)

Crude foods: The index for crude foodstuffs and feedstuffs decreased 4.2 percent in August. From May to August, crude foods prices fell 5.5 percent compared with a 1.3-percent advance from February to May. In August, a major factor in the monthly decline was the index for soybeans, which dropped 17.8 percent. Lower prices for corn and slaughter chickens also contributed to the decrease in the crude foods index. (See table 2.)

Crude energy: Prices for crude energy materials fell 2.7 percent in August. For the 3 months ended in August, the crude energy materials index moved up 1.5 percent after rising 0.9 percent in the previous 3-month period. Accounting for almost three-quarters of the monthly decline, natural gas prices fell 8.2 percent. The index for crude petroleum, which decreased 1.2 percent, also was a factor in lower prices for crude energy materials.

Crude core: The index for crude nonfood materials less energy moved down 0.4 percent in August. From May to August, crude core prices declined 0.6 percent subsequent to a 3.7- percent drop for the 3 months ended in May. In August, the monthly decrease in the crude core index can be traced to corn prices, which fell 15.2 percent.

Services Analysis

Trade industries: The Producer Price Index for the net output of total trade industries moved up 0.8 percent in August following a 0.1-percent rise in July. (Trade indexes measure changes in margins received by wholesalers and retailers.) Leading the advance, margins received by wholesale trade industries rose 0.8 percent. Higher margins received by family clothing stores and 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 0.6 percent in August after no change in July. Leading the increase, prices received by the scheduled passenger air transportation industry advanced 1.7 percent. Higher prices received for freight transportation arrangement and by the truck transportation industry group also were factors in the increase in the transportation and warehousing industries index.

Services less trade, transportation, and warehousing: The Producer Price Index for the net output of services less trade, transportation, and warehousing climbed 0.4 percent in August, the third consecutive rise. Leading the August advance, prices received by the industry for commercial banking moved up 1.0 percent. Higher prices received by portfolio managers and wireless telecommunication carriers also contributed to the rise in the index for services less trade, transportation, and warehousing.

Producer Price Index to Transition from Stage-of-Processing to Final Demand- Intermediate Demand Aggregation System

Effective with the January 2014 PPI data release in February 2014, BLS will transition from the Stage of Processing (SOP) to the Final Demand-Intermediate Demand (FD-ID) aggregation system. This shift will result in significant changes to the PPI news release, as well as other documents available from PPI. The transition to the FD-ID system is the culmination of a long-standing PPI objective to improve the current SOP aggregation system by incorporating PPIs for services, construction, government purchases, and exports. In comparison to the SOP system, the FD-ID system more than doubles current PPI coverage of the United States economy to over 75 percent of in-scope domestic production. The FD-ID system was introduced as a set of experimental indexes in January 2011. Nearly all new FD-ID goods, services, and construction indexes provide historical data back to either November 2009 or April 2010, while the indexes for goods that correspond with the historical SOP indexes go back to the 1970s or earlier.

The FD-ID system will highlight the index for final demand, which measures price changes for goods, services, and construction sold to final demand: personal consumption, capital investment, government purchases, and exports. The composition of products in the final demand price index differs from that of the finished goods index in two major respects. First, it includes government purchases and exports. Second, it includes services and construction, which are not reflected in finished goods.

The FD-ID system also includes two separate parallel treatments of intermediate demand: price changes for goods, services, and construction sold to business as inputs to production. The first treatment, intermediate demand by commodity type, measures price changes based on similarity of product and includes aggregate indexes for processed goods for intermediate demand, unprocessed goods for intermediate demand, and services for intermediate demand.

The second treatment, intermediate demand by production flow, is a stage-based system of price indexes, where price changes for goods, services, and construction can be studied as they move through the production chain of the economy to final demand. This treatment includes four stages of intermediate demand, which were established to maximize forward flow of production through the economy, while minimizing backflow of production.

These FD-ID indexes are constructed using PPI commodity indexes for goods, services, and construction, where products are assigned to various categories according to buyer type and level of fabrication. A product purchased by different classes of buyers is assigned to multiple FD-ID aggregates, with unique weights allocated to each aggregate based on the product's value of shipments to each buyer type.

To assist with the transition to the FD-ID system, PPI will provide, on a monthly basis, a version of the PPI news release based on the FD-ID model, starting with the publication of July 2013 data in August. The document will be labeled "Experimental" through the December release in January 2014 and will be posted to the PPI Experimental Aggregation webpage about two weeks after each month's scheduled PPI release. That webpage, http://www.bls.gov/ppi/experimentalaggregation.htm, also contains detailed methodological information for the FD-ID aggregation system. With the publication of January 2014 data in February 2014, the FD-ID version of the PPI news release will become the official news release document of record.

Further information also is available from the PPI Section of Index Analysis and Public information, at ppi-info@bls.gov or (202) 691-7705.