December 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 advanced 0.4 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods declined 0.1 percent in November and 0.2 percent in October. At the earlier stages of processing, prices received by producers of intermediate goods rose 0.6 percent in December, and the crude goods index climbed 2.4 percent. On an unadjusted basis, prices for finished goods increased 1.2 percent in 2013 compared with a 1.4-percent advance in 2012. (See table A.)

Stage-of-Processing Analysis

Finished goods

Leading the December rise in the finished goods index, prices for finished energy goods increased 1.6 percent. Also contributing to the advance, the index for finished goods less foods and energy moved up 0.3 percent. By contrast, prices for finished consumer foods decreased 0.6 percent.

Finished energy: Prices for finished energy goods climbed 1.6 percent in December, the largest advance since a 2.5-percent jump in June 2013. Over half of the rise in December can be traced to a 2.2-percent increase in the gasoline index. Higher prices for diesel fuel and home heating oil also were factors in the advance in the finished energy goods index. (See table 2.)

Finished core: The index for finished goods less foods and energy moved up 0.3 percent in December, the largest advance since a 0.5-percent rise in July 2012. Nearly half of the December increase is attributable to prices for tobacco products, which climbed 3.6 percent. Higher motor vehicle prices also contributed to the advance in the finished core index.

Finished foods: The index for finished consumer foods fell 0.6 percent in December following no change in November. Leading the decrease, prices for fresh and dry vegetables dropped 13.4 percent.

Intermediate goods

The Producer Price Index for intermediate materials, supplies, and components increased 0.6 percent in December after two consecutive declines. Nearly three-quarters of the broad-based advance can be traced to the index for intermediate energy goods, which rose 1.9 percent. Prices for intermediate materials less foods and energy and for intermediate foods and feeds increased 0.2 percent and 0.4 percent, respectively. The index for intermediate materials, supplies, and components was unchanged in 2013 following a 0.4-percent advance in 2012. (See table B.)

Intermediate energy: Prices for intermediate energy goods moved up 1.9 percent in December, the largest rise since a 3.6-percent jump in February 2013. Accounting for about sixty percent of the December increase, the index for diesel fuel climbed 7.9 percent. Higher prices for jet fuel and gasoline also were factors in the advance in the intermediate energy goods index. (See table 2.)

Intermediate core: The index for intermediate materials less foods and energy moved up 0.2 percent in December compared with a 0.1-percent decline in November. Over three-quarters of the increase can be attributed to a 1.3-percent advance in prices for basic organic chemicals. A rise in the index for biological diagnostics also contributed to higher intermediate core prices.

Intermediate foods: Prices for intermediate foods and feeds rose 0.4 percent in December subsequent to a 0.9-percent decrease a month earlier. Leading the advance, the index for prepared animal feeds moved up 2.3 percent.

Crude goods

The Producer Price Index for crude materials for further processing rose 2.4 percent in December. For the 3 months ended in December, prices for crude materials fell 1.1 percent following a 0.7-percent decrease from June to September. In December, the monthly advance was led by the index for crude energy materials, which jumped 6.2 percent. Higher prices for crude nonfood materials less energy also contributed to the increase, rising 0.6 percent. By contrast, the index for crude foodstuffs and feedstuffs moved down 0.3 percent. (See table B.)

Crude energy: Prices for crude energy materials advanced 6.2 percent in December. From September to December, the index for crude energy materials decreased 3.6 percent after increasing 3.8 percent for the 3 months ended in September. In December, about two-thirds of the broad-based monthly rise can be traced to a 7.1-percent jump in prices for crude petroleum. Increases in the indexes for natural gas and coal also were factors in the advance in crude energy prices. (See table 2.)

Crude core: The index for crude nonfood materials less energy moved up 0.6 percent in December. For the 3 months ended in December, prices for crude nonfood materials less energy advanced 1.5 percent compared with a 1.3-percent decline from June to September. Most of the monthly increase in December is attributable to prices for carbon steel scrap, which rose 6.0 percent. Higher prices for corn also contributed to the advance in the crude core index.

Crude foods: In December, prices for crude foodstuffs and feedstuffs decreased 0.3 percent. From September to December, the crude foods index rose 0.6 percent after moving down 5.5 percent for the 3 months ended in September. Leading the monthly decline in December, the index for slaughter barrows and gilts dropped 9.7 percent.

Services Analysis

Trade industries: The Producer Price Index for the net output of total trade industries decreased 0.5 percent in December after falling 0.6 percent in November. (Trade indexes measure changes in margins received by wholesalers and retailers.) Accounting for sixty percent of the December decline, margins received by gasoline stations with convenience stores dropped 9.0 percent. Lower margins received by electronics stores and by warehouse clubs and supercenters also were factors in the decrease in the total trade industries index. In 2013, the total trade industries index rose 0.7 percent.

Transportation and warehousing industries: The Producer Price Index for the net output of transportation and warehousing industries moved up 1.0 percent in December following a 0.4- percent decline in November. Most of the increase can be traced to prices received by the scheduled passenger air transportation industry, which rose 5.7 percent. Higher prices for deep sea freight transportation and long-distance specialized freight trucking of new goods also contributed to the rise in the transportation and warehousing industries index. In 2013, the transportation and warehousing industries index advanced 2.1 percent.

Services less trade, transportation, and warehousing: The Producer Price Index for the net output of services less trade, transportation, and warehousing inched up 0.1 percent in December, the same as in each of the previous two months. Over half of the December advance can be attributed to a 0.5-percent increase in prices received by general medical and surgical hospitals. Higher prices for portfolio management and passenger car rental also were factors in the rise in the index for services less trade, transportation, and warehousing. In 2013, the index for services less trade, transportation, and warehousing increased 1.6 percent.

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.