October 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 declined 0.2 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods fell 0.1 percent in September and rose 0.3 percent in August. At the earlier stages of processing, prices received by producers of intermediate goods declined 0.4 percent, and the crude goods index decreased 0.9 percent. On an unadjusted basis, prices for finished goods advanced 0.3 percent for the 12 months ended October 2013. (See table A.)

Stage-of-Processing Analysis

Finished goods

In October, the 0.2-percent decrease in the finished goods index is attributable to prices for finished energy goods, which fell 1.5 percent. By contrast, the indexes for finished consumer foods and for finished goods less foods and energy moved up 0.8 percent and 0.2 percent, respectively.

Finished energy: Prices for finished energy goods moved down 1.5 percent in October, the first decline since a 2.5-percent drop in April 2013. Nearly all of the October decrease can be traced to the index for gasoline, which fell 3.8 percent. Lower prices for diesel fuel and residential natural gas also contributed to the decline in the index for finished energy goods. (See table 2.)

Finished foods: In October, prices for finished consumer foods advanced 0.8 percent, the largest rise since a 0.9-percent jump in March 2013. Nearly sixty percent of the October increase can be traced to the index for beef and veal, which climbed 7.5 percent. Higher prices for fresh and dry vegetables also contributed to the advance in the finished consumer foods index.

Finished core: The index for finished goods less foods and energy rose 0.2 percent in October subsequent to a 0.1-percent increase in September. Leading the October advance, prices for passenger cars climbed 1.7 percent. By contrast, the index for light motor trucks edged down 0.1 percent. (On a not seasonally adjusted basis, prices for passenger cars increased 3.8 percent and the index for light motor trucks moved up 4.2 percent.) 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 2014 Model Vehicles, at www.bls.gov/web/ppi/ppimotveh.htm).

Intermediate goods

The Producer Price Index for intermediate materials, supplies, and components fell 0.4 percent in October, the largest decline since a 0.6-percent drop in April 2013. Accounting for two-thirds of the broad-based October decrease, prices for intermediate energy goods moved down 1.2 percent. The index for intermediate foods and feeds fell 1.5 percent, and prices for intermediate materials less foods and energy declined 0.1 percent. For the 12 months ended in October, the intermediate goods index moved down 0.8 percent, the largest decrease since a 1.1-percent drop for the 12 months ended April 2013. (See table B.)

Intermediate energy: The index for intermediate energy goods declined 1.2 percent in October following five consecutive advances. A major factor in the decrease was prices for diesel fuel, which fell 2.2 percent. Lower prices for gasoline and commercial electric power also contributed to the decline in the index for intermediate energy goods. (See table 2.)

Intermediate foods: The index for intermediate foods and feeds fell 1.5 percent in October after rising 0.3 percent in September. Leading the decrease were prices for prepared animal feeds, which dropped 6.7 percent. A decline in the index for pork also contributed to lower prices for intermediate foods and feeds.

Intermediate core: Prices for intermediate materials less foods and energy inched down 0.1 percent in October following a 0.1-percent rise in September. The decline was led by the index for industrial chemicals, which decreased 1.2 percent.

Crude goods

The Producer Price Index for crude materials for further processing declined 0.9 percent in October. For the 3 months ended in October, prices for crude goods fell 3.1 percent following a 3.6-percent rise for the 3 months ended in July. The monthly decrease in October was led by the index for crude energy materials, which moved down 2.9 percent. Lower prices for crude nonfood materials less energy also contributed to the decline, falling 0.5 percent. By contrast, the index for crude foodstuffs and feedstuffs increased 1.2 percent. (See table B.)

Crude energy: The index for crude energy materials fell 2.9 percent in October. From July to October, prices for crude energy materials moved down 3.5 percent after climbing 9.7 percent from April to July. In October, most of the monthly decrease can be traced to a 4.2-percent drop in the crude petroleum index. Lower prices for coal also were a factor in the decline in the index for crude energy materials. (See table 2.)

Crude core: The index for crude nonfood materials less energy moved down 0.5 percent in October. For the 3 months ended in October, prices for crude nonfood materials less energy fell 1.8 percent compared with a 2.0-percent decline for the 3 months ended in July. The monthly decrease in October was led by the corn index, which dropped 8.5 percent. Lower prices for gold ores also contributed significantly to the decline in the crude core index.

Crude foods: The index for crude foodstuffs and feedstuffs climbed 1.2 percent in October. From July to October, prices for crude foodstuffs and feedstuffs fell 3.4 percent after moving up 0.6 percent from April to July. The monthly increase in October was primarily the result of a 5.5-percent rise in the slaughter cattle index. Higher prices for slaughter poultry also were a factor in the advance in the crude foods index.

Services Analysis

Trade industries: The Producer Price Index for the net output of total trade industries moved up 1.2 percent in October, the largest rise since a similar 1.2-percent advance in October 2012. (Trade indexes measure changes in margins received by wholesalers and retailers.) Accounting for over a quarter of the October 2013 increase, margins received by family clothing stores jumped 20.0 percent. Higher margins received by merchant wholesalers of both durable and nondurable goods 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 rose 0.4 percent in October after a 0.9-percent decrease in September. Leading the advance, prices received by the air transportation industry group moved up 2.1 percent. Higher prices received by the industries for line-haul railroads and local specialized freight trucking of new goods 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 edged up 0.1 percent in October compared with a 0.3-percent decline a month earlier. Leading the increase, prices received by portfolio managers rose 5.4 percent. Higher prices received by the industries for passenger car rental and for general medical and surgical hospitals also contributed to the advance in the index for services less trade, transportation, and warehousing.

Effect of Partial Government Shutdown on PPI Data

The October partial Federal government shutdown delayed the transmission of October Producer Price Index (PPI) pricing surveys by about one week. This delay affected the collection, processing, and analysis of October data, resulting in a delay in the October data release by a week. The response rate for the October PPI survey was within the normal range. The delay is expected to have no effect on November PPI data, which will be released as originally scheduled on December 13.

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.

Recalculated Seasonal Adjustment Factors and Relative Importance Figures to be Available on February 14, 2014

Each year with the release of PPI data for January, seasonal adjustment factors and relative importance figures are recalculated to reflect price movements from the just-completed calendar year. In accordance with the transition to the Final Demand-Intermediate Demand aggregation system, aggregate seasonal factor and relative importance data will be published on this new basis. The following seasonal adjustment information will be available on February 14, 2014 (2 workdays prior to the release of PPI data for January 2014 on February 19):

* Direct seasonal factors for commodity indexes for the year 2014, * Recalculated seasonal factors for the last 5 years (2009-2013) for the commodity indexes, * Recalculated seasonal factors for the last 5 years (2009-2013) for the final demand- intermediate demand indexes.

This routine recalculation may result in revisions to seasonally adjusted indexes for the previous 5 years, which also will be posted on BLS website. In addition, the following relative importance tables for December 2013 will be available on February 14, 2014:

* Final demand by individual commodities, * Final demand by component series, * Individual commodities of intermediate demand by commodity type, * Component series of intermediate demand by commodity type, * Individual commodities of intermediate demand by production flow, * Component series of intermediate demand by production flow, * Commodities, all levels, * Wherever-provided services and construction.

To obtain this information, visit the PPI website at 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.