May 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 fell 0.2 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This decline followed increases of 0.6 percent in April and 0.5 percent in March. On an unadjusted basis, the index for final demand advanced 2.0 percent for the 12 months ended in May. (See table A.)

In May, the 0.2-percent decrease in final demand prices can be traced to the indexes for final demand services and final demand goods, both of which also declined 0.2 percent.

Within intermediate demand, prices for processed goods edged down 0.1 percent, the index for unprocessed goods was unchanged, and prices for services fell 0.4 percent. (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 services: Prices for final demand services moved down 0.2 percent in May, the first decrease since a 0.3-percent drop in February. Most of the decline in May is attributable to the index for final demand trade services, which fell 0.5 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing also moved lower, inching down 0.1 percent. In contrast, the index for final demand transportation and warehousing services climbed 0.9 percent.

Product detail: In May, a 1.1-percent decrease in margins for machinery and equipment wholesaling accounted for about half of the decline in prices for final demand services. The indexes for securities brokerage, dealing, investment advice, and related services; apparel, footwear, and accessories retailing; health, beauty care, and optical goods retailing; food wholesaling; and consumer loans (partial) also moved lower. Conversely, prices for truck transportation of freight increased 0.9 percent in May. The indexes for fuels and lubricants retailing and for legal services also advanced. (See table 4.)

Final demand goods: The index for final demand goods fell 0.2 percent in May, the largest decrease since a 0.7-percent drop in April 2013. In May, prices for final demand energy and final demand foods both declined 0.2 percent. The index for final demand goods less foods and energy was unchanged.

Product detail: In May, gasoline prices fell 0.9 percent, accounting for about half of the decline in the final demand goods index. Prices for basic organic chemicals; pork; pharmaceutical preparations; residential electric power; and natural cheese, except cottage cheese also moved down. In contrast, the diesel fuel index rose 3.9 percent in May. Prices for processed poultry and cigarettes also advanced.

Special grouping, Final demand less foods, energy, and trade: Prices for final demand less foods, energy, and trade services were unchanged in May, following advances of 0.3 percent in April and March. (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 edged down 0.1 percent in May. (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.) This decrease was led by prices for finished consumer energy goods, which fell 0.3 percent. The index for finished consumer foods declined 0.1 percent. Conversely, prices for finished goods less foods and energy advanced 0.1 percent. Within finished goods, falling prices for gasoline; pork; pharmaceutical preparations; residential electric power; and natural cheese, except cottage cheese outweighed higher prices for cigarettes, processed poultry, diesel fuel, and passenger cars.

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 down 0.1 percent in May following no change in April. In May, prices for processed materials less foods and energy and for processed foods and feeds both fell 0.2 percent. In contrast, the index for processed energy goods rose 0.3 percent. For the 12 months ended in May, prices for processed goods for intermediate demand advanced 1.3 percent. (See table B.)

Product detail: In May, a 2.9-percent decrease in prices for basic organic chemicals was a major factor in the decline in the index for processed goods for intermediate demand. The indexes for gasoline; natural cheese, except cottage cheese; pork; and cold rolled steel sheet and strip also fell. Conversely, prices for diesel fuel advanced 3.9 percent in May. The indexes for natural gas to electric utilities, nonferrous mill shapes, and processed poultry also moved up. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand was unchanged in May following a 0.4-percent advance in April. In May, a 2.7-percent increase in the index for unprocessed energy materials offset a 2.3-percent decrease in prices for unprocessed foodstuffs and feedstuffs and a 0.7-percent decline in the index for unprocessed nonfood materials less energy. For the 12 months ended in May, the index for unprocessed goods for intermediate demand moved up 4.4 percent.

Product detail: In May, prices for crude petroleum advanced 3.2 percent. The indexes for natural gas; corn; wheat; construction sand, gravel, and crushed stone; and coal also increased. In contrast, prices for slaughter livestock moved down 3.0 percent. The indexes for carbon steel scrap, raw milk, soybeans, and gold ores also decreased.

Services for intermediate demand: The index for services for intermediate demand moved down 0.4 percent in May, the largest decrease since a 0.5-percent drop in May 2013. The May 2014 decline was led by a 0.5-percent decrease in prices for services less trade, transportation, and warehousing for intermediate demand. Also contributing but to a lesser extent, the index for trade services for intermediate demand fell 0.7 percent. Conversely, prices for transportation and warehousing services for intermediate demand advanced 0.4 percent. For the 12 months ended in May, prices for services for intermediate demand rose 1.2 percent. (See table C.)

Product detail: Accounting for over 40 percent of the May decrease in the index for services for intermediate demand, prices for securities brokerage, dealing, investment advice, and related services fell 2.8 percent. The indexes for business loans (partial); portfolio management; passenger car rental; metals, minerals, and ores wholesaling; and marketing consulting services also declined. In contrast, prices for truck transportation of freight rose 0.9 percent in May. The indexes for legal services and for machinery and equipment parts and supplies wholesaling also advanced.

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 down 0.3 percent in May, the largest decrease since a 0.4-percent drop in March 2013. The May decline was led by prices for total services inputs to stage 4 intermediate demand, which fell 0.4 percent. The index for total goods inputs edged down 0.1 percent. (See table D.) Decreasing prices for securities brokerage, dealing, investment advice, and related services; business loans (partial); nonresidential real estate rents; portfolio management; natural cheese, except cottage cheese; and passenger car rental outweighed advances in the indexes for diesel fuel, machinery and equipment parts and supplies wholesaling, and legal services. For the 12 months ended in May, prices for stage 4 intermediate demand moved up 1.3 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 fell 0.3 percent in May, the first decrease since a 0.3-percent decline in July 2013. In May, prices for total goods inputs to stage 3 intermediate demand moved down 0.7 percent, and the index for total services inputs inched down 0.1 percent. Lower prices for slaughter hogs, raw milk, business loans (partial), marketing consulting services, gasoline, and passenger car rental outweighed increases in the indexes for diesel fuel, legal services, and fuels and lubricants retailing. For the 12 months ended in May, the index for stage 3 intermediate demand climbed 2.9 percent.

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.): Prices for stage 2 intermediate demand rose 0.3 percent in May subsequent to declines in the prior two months. In May, the index for total goods inputs to stage 2 intermediate demand advanced 1.0 percent, and prices for total services inputs moved down 0.4 percent. Higher prices for crude petroleum, natural gas, legal services, formula feeds, fuels and lubricants retailing, and diesel fuel outweighed declines in the indexes for business loans (partial); basic organic chemicals; and metals, minerals, and ores wholesaling. For the 12 months ended in May, prices for stage 2 intermediate demand increased 1.6 percent.

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.): Prices for stage 1 intermediate demand fell 0.6 percent in May, the third consecutive decrease. The indexes for total goods inputs to stage 1 intermediate demand and for total services inputs both moved down 0.6 percent in May. Declines in the indexes for basic organic chemicals; carbon steel scrap; securities brokerage, dealing, investment advice, and related services; portfolio management; paper and plastic products wholesaling; and gasoline outweighed increases in the indexes for diesel fuel, fuels and lubricants retailing, and copper base scrap. For the 12 months ended in May, prices for stage 1 intermediate demand rose 1.6 percent.