January 2014 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 final demand increased 0.2 percent in January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed a 0.1- percent rise in December and no change in November. On an unadjusted basis, the index for final demand moved up 1.2 percent for the 12 months ended in January, the largest 12-month advance since a 1.2-percent increase in October 2013. (See table A.)

In January, the 0.2-percent advance in prices for final demand can be primarily traced to the index for final demand goods, which rose 0.4 percent. Prices for final demand services inched up 0.1 percent.

Within intermediate demand, the index for processed goods increased 0.6 percent in January, prices for unprocessed goods moved up 0.9 percent, and the index for services was unchanged. (See tables B and C.)

Final Demand

(Final demand includes goods, services, and construction which are sold for personal consumption, capital investment, government purchases, and export. See table 4 for product detail.)

Final demand goods: The index for final demand goods advanced 0.4 percent in January, the same as in December. Leading the broad-based increase in January, prices for final demand goods less foods and energy rose 0.4 percent. The indexes for final demand foods and final demand energy moved up 1.0 percent and 0.3 percent, respectively.

Product detail: Accounting for nearly a quarter of the January rise in the index for final demand goods, prices for pharmaceutical preparations advanced 2.7 percent. The indexes for dairy products, residential electric power, utility natural gas, beef and veal, and unprocessed finfish also moved up. In contrast, the gasoline index fell 1.3 percent. Prices for diesel fuel and integrated microcircuits also decreased. (See table 4.)

Final demand services: The index for final demand services inched up 0.1 percent in January following a 0.1-percent decline in December. In January, the indexes for both final demand services less trade, transportation, and warehousing and for final demand trade services moved up 0.1 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, prices for final demand transportation and warehousing services fell 1.1 percent.

Product detail: A major factor in the increase in the index for final demand services was prices for loan services (partial), which climbed 2.1 percent. The indexes for apparel, jewelry, footwear, and accessories retailing; traveler accommodation services; hospital outpatient care; and securities brokerage, dealing, and investment advice also advanced. In contrast, prices for airline passenger services fell 4.3 percent. The indexes for services related to securities brokerage and dealing; food and alcohol retailing; and health, beauty, and optical goods retailing also declined.

Special grouping, Final demand less foods, energy, and trade: Prices for final demand less foods, energy, and trade services inched up 0.1 percent in January after a 0.3-percent rise in the previous month. (The index for final demand less foods, energy, and trade services represents about two-thirds of final demand.)

Special grouping, Finished goods: Prices for finished goods increased 0.6 percent in January. (The finished goods index represents about two-thirds of final demand goods, through the exclusion of the weight for government purchases and exports. The finished goods index represents about one-quarter of overall final demand.) In January, nearly half of the broad- based advance can be traced to the index for finished goods less foods and energy, which climbed 0.5 percent. Prices for finished consumer foods and finished consumer energy goods increased 1.1 percent and 0.4 percent, respectively. Within finished goods, higher prices for pharmaceutical preparations, residential electric power, dairy products, and residential natural gas outweighed lower prices for gasoline, soft drinks, and wine and brandy spirits.

Intermediate Demand

(Intermediate demand includes goods, services, and maintenance and repair construction sold to businesses, excluding capital investment. BLS publishes two parallel treatments of intermediate demand, each constructed from the identical set of commodity price indexes. The first treatment organizes commodities according to commodity type, and the second organizes commodities using a stage-based, production flow model. See the technical note for more information.)

Intermediate Demand by Commodity Type

Processed goods for intermediate demand: The index for processed goods for intermediate demand moved up 0.6 percent in January, the largest advance since a 1.0-percent rise in February 2013. The broad-based increase was led by the index for processed energy goods, which rose 1.4 percent. Prices for processed materials less foods and energy and for processed foods and feeds increased 0.3 percent and 1.7 percent, respectively. For the 12 months ended in January, the index for processed goods for intermediate demand edged up 0.3 percent, the first 12-month increase since August 2013. (See table B.)

Product detail: In January, a 2.8-percent jump in prices for electric power accounted for nearly one-third of the increase in the index for processed goods for intermediate demand. Prices also advanced for utility natural gas, dairy products, drugs and pharmaceuticals, prepared animal feeds, and primary basic organic chemicals. Conversely, the index for diesel fuel declined 1.8 percent. Prices for paper boxes and containers and for confectionery materials also decreased in January. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand increased 0.9 percent in January following a 2.3-percent jump in December. Leading the January increase, prices for unprocessed foodstuffs and feedstuffs climbed 3.5 percent. The index for unprocessed nonfood materials less energy moved up 1.4 percent. In contrast, prices for unprocessed energy materials fell 1.5 percent. For the 12 months ended in January, the index for unprocessed goods for intermediate demand fell 0.9 percent, the fourth consecutive 12-month decline.

Product detail: A major factor in the January increase in prices for unprocessed goods for intermediate demand was the index for slaughter steers and heifers, which surged 8.8 percent. Prices for natural gas, raw milk, iron and steel scrap, unprocessed finfish, and copper ores also rose in January. Conversely, the index for crude petroleum fell 7.6 percent. Prices for corn and oilseeds also moved down in January.

Services for intermediate demand: The index for services for intermediate demand was unchanged in January after edging up 0.1 percent in December. Prices for services less trade, transportation, and warehousing for intermediate demand rose 0.3 percent in January. In contrast, the indexes for trade services and for transportation and warehousing services for intermediate demand both declined 0.3 percent. For the 12 months ended in January, the index for services for intermediate demand advanced 0.9 percent. (See table C.)

Product detail: In January, among the indexes within services for intermediate demand, prices for securities brokerage, dealing, and investment advice climbed 2.0 percent. The indexes for loan services (partial); portfolio management; traveler accommodation services; and metals, minerals, and ores wholesaling also increased. Conversely, margins for building materials, paint, and hardware wholesaling fell 4.9 percent. The indexes for services related to securities brokerage and dealing; airline passenger services; passenger car rental; and construction, mining, and forestry machinery and equipment rental and leasing also declined.

Intermediate Demand by Production Flow

Stage 4 intermediate demand (The stage 4 intermediate demand index measures price changes for products purchased by industries that primarily produce output sold to final demand.): The index for stage 4 intermediate demand moved up 0.2 percent in January following a 0.3-percent rise a month earlier. In January, the index for total goods inputs to stage 4 intermediate demand rose 0.4 percent, and prices for total services inputs edged down 0.1 percent. (See table D.) Rising prices for commercial electric power; business loans (partial); securities brokerage, dealing, and investment advice; portfolio management; dairy products; and unprocessed finfish outweighed decreases in the indexes for services related to securities brokerage and dealing; building materials, paint, and hardware wholesaling; and diesel fuel. For the 12 months ended in January, the index for stage 4 intermediate demand advanced 0.7 percent. (See table 6.)

Stage 3 intermediate demand (The stage 3 intermediate demand index measures price changes for products purchased by industries that primarily produce output sold to industries classified in stage 4.): The index for stage 3 intermediate demand climbed 1.0 percent in January, the largest increase since a 1.3-percent advance in April 2011. In January, prices for total goods inputs to stage 3 intermediate demand jumped 1.5 percent, and the index for total services inputs moved up 0.3 percent. Higher prices for raw milk, slaughter steers and heifers, business loans (partial), electric power, unprocessed finfish, and natural gas outweighed lower prices for gasoline, diesel fuel, and airline passenger services. For the 12 months ended in January, the index for stage 3 intermediate demand rose 1.2 percent, the largest advance since a 1.3-percent increase for the 12 months ended August 2013.

Stage 2 intermediate demand (The stage 2 intermediate demand index measures price changes for products purchased by industries that primarily produce output sold to industries classified in stage 3.): The index for stage 2 intermediate demand inched up 0.1 percent in January compared with a 1.5-percent increase in the previous month. In January, prices for total services inputs to stage 2 intermediate demand rose 0.4 percent, and the index for total goods inputs edged down 0.1 percent. Higher prices for business loans (partial), natural gas, soybean cake and meal, liquefied petroleum gas, and iron and steel scrap outweighed declines in the indexes for crude petroleum; services related to securities brokerage and dealing; grains; and building materials, paint, and hardware wholesaling. For the 12 months ended in January, the index for stage 2 intermediate demand fell 0.2 percent, the third consecutive 12-month decrease.

Stage 1 intermediate demand (The stage 1 intermediate demand index measures price changes for products purchased by industries that primarily produce output sold to industries classified in stage 2.): The index for stage 1 intermediate demand advanced 1.0 percent in January, the largest increase since a similar 1.0-percent rise in September 2012. In January, prices for total goods inputs to stage 1 intermediate demand climbed 1.8 percent, and the index for total services inputs moved down 0.2 percent. Rising prices for electric power; iron and steel scrap; primary basic organic chemicals; securities brokerage, dealing, and investment advice; portfolio management; and traveler accommodation services outweighed decreases in the indexes for services related to securities brokerage and dealing; gasoline; and building materials, paint, and hardware wholesaling. For the 12 months ended in January, the index for stage 1 intermediate demand moved up 1.4 percent, the largest gain since a 1.4-percent advance in August 2013.

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

With this release, BLS transitions from the Stage of Processing (SOP) to the Final Demand- Intermediate Demand (FD-ID) aggregation system. This shift results 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 highlights 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.

The webpage www.bls.gov/ppi/fdidaggregation.htm contains detailed methodological information for the FD-ID aggregation system. Further information is available from the PPI Section of Index Analysis and Public information, at ppi-info@bls.gov or (202) 691-7705.

Resampling of Industries

Effective with this release, the Producer Price Index (PPI) includes data for 34 resampled industries classified according to the 2012 North American Industry Classification System (NAICS). The Bureau of Labor Statistics periodically updates the sample of producers providing data for the PPI to reflect current conditions more accurately when the structure, membership, technology, or product mix of an industry shifts. The first results of this systematic process were published in July 1986. Subsequent efforts have been completed at 6-month intervals.

For information on specific index additions, deletions, and recodes effective this month, see the January 2014 issue of the PPI Detailed Report online at www.bls.gov/ppi/ppidr201401.pdf, or contact the PPI's Section of Index Analysis and Public Information at ppi-info@bls.gov or (202) 691-7705.

NAICS Code Industry 212325 Clay, ceramic, and refractory minerals mining 311423 Dried and dehydrated food manufacturing 311710 Seafood product preparation and packaging 314110 Carpet and rug mills 315220 Men's and boys' cut and sew apparel manufacturing 315240 Women's, girls', and infants' cut and sew apparel manufacturing 323120 Support activities for printing 325110 Petrochemical manufacturing 325120 Industrial gas manufacturing 325130 Synthetic dye and pigment manufacturing 327991 Cut stone and stone product manufacturing 332119 Other metal stamping, except automotive 332216 Saw blade, handsaw, and hand and edge tool manufacturing 332811 Metal heat treating 332993 Ammunition, except small arms, manufacturing 333923 Overhead cranes, hoists and monorail systems 333993 Packaging machinery manufacturing 334118 Computer terminal and other computer peripheral equipment manufacturing 334210 Telephone apparatus manufacturing 33441K Capacitor, resistor, coil, transformer, and other inductor manufacturing 334516 Analytical laboratory instrument manufacturing 339115 Ophthalmic goods manufacturing 446130 Optical goods stores 451110 Sporting goods stores 451120 Hobby, toy, and game stores 483113 Coastal and Great Lakes freight transport 483211 Inland water freight transportation 511210 Software publishers 523110 Investment banking and securities dealing 523120 Securities brokerage 523930 Investment advice 561612 Security guards and patrol services 611420 Computer training 811310 Commercial machinery repair and maintenance

Recalculation of Seasonal Adjustment Factors

Effective with this release, seasonal adjustment factors have been recalculated to reflect price- movement patterns during 2013 for the Final Demand-Intermediate Demand (FD-ID) system and commodity-grouping indexes. This routine annual recalculation may affect previously published seasonally adjusted indexes and percent changes for January 2009 through December 2013.

Revised seasonally adjusted data for this period, as well as seasonal adjustment factors for directly adjusted commodity indexes to be used through December 2014, were released February 14, 2014. To obtain this information, contact the Division of Industrial Prices and Price Indexes, Section of Index Analysis and Public Information at ppi-info@bls.gov or (202) 691-7705, or visit the Producer Price Index homepage at www.bls.gov/ppi.

Tables E and F provide monthly seasonally adjusted percent changes for major FD-ID system indexes in 2013, based on former and recalculated seasonal factors. These percent changes include final price data through August 2013 and may differ from values shown in tables A through D of this release, which include final price data through September 2013.