August 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 was unchanged in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.1 percent in July and 0.4 percent in June. On an unadjusted basis, the index for final demand increased 1.8 percent for the 12 months ended in August. (See table A.)

In August, a 0.3-percent rise in prices for final demand services offset a 0.3-percent decrease in the index for final demand goods.

Within intermediate demand, prices for processed goods fell 0.3 percent, the index for unprocessed goods declined 3.3 percent, and prices for services moved up 0.2 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: The final demand services index climbed 0.3 percent in August after inching up 0.1 percent in July. Eighty percent of the August advance can be traced to a 0.3- percent rise in prices for final demand services less trade, transportation, and warehousing. The index for final demand transportation and warehousing services also increased 0.3 percent. Margins for final demand trade services were unchanged. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: Accounting for over 20 percent of the August advance in the index for final demand services, prices for loan services (partial) increased 1.7 percent. The indexes for traveler accommodation services; health, beauty, and optical goods retailing; hospital outpatient care; securities brokerage, dealing, and investment advice; and airline passenger services also moved higher. In contrast, prices for services related to securities brokerage and dealing fell 4.5 percent in August. The indexes for food and alcohol retailing and for truck transportation of freight also decreased. (See table 4.)

Final demand goods: The index for final demand goods moved down 0.3 percent in August, the largest decrease since a 0.7-percent drop in April 2013. Over 80 percent of the August decline is attributable to prices for final demand energy, which fell 1.5 percent. The index for final demand foods decreased 0.5 percent. Prices for final demand goods less foods and energy were unchanged.

Product detail: Over a quarter of the decline in prices for final demand goods can be attributed to the gasoline index, which fell 1.4 percent. Prices for utility natural gas, chicken eggs, diesel fuel, electric power, and raw cotton also moved lower. Conversely, the index for potatoes surged 28.0 percent. Prices for pharmaceutical preparations and jet fuel also advanced.

Special grouping, Final demand less foods, energy, and trade: The index for final demand less foods, energy, and trade services advanced 0.2 percent in August, the third consecutive 0.2- percent increase. For the 12 months ended in August, prices for final demand less foods, energy, and trade services rose 1.8 percent. (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 fell 0.3 percent in August, the largest decrease since a 0.6-percent decline in April 2013. (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.) Most of the August decrease can be traced to the index for finished consumer energy goods, which fell 1.4 percent. Prices for finished consumer foods moved down 0.3 percent. In contrast, the index for finished goods less foods and energy edged up 0.1 percent. Within finished goods, falling prices for gasoline, residential natural gas, eggs for fresh use, home heating oil, pork, and fresh vegetables (except potatoes) outweighed rising prices for pharmaceutical preparations, potatoes, and processed fruits and vegetables.

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.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand moved down 0.3 percent in August, the largest decrease since a 0.3-percent decline in November 2013. In August, prices for processed energy goods fell 1.7 percent, and the index for processed foods and feeds declined 0.8 percent. In contrast, the index for processed materials less foods and energy moved up 0.2 percent. For the 12 months ended in August, prices for processed goods for intermediate demand rose 1.3 percent. (See table B.)

Product detail: In August, a 3.1-percent decrease in prices for diesel fuel accounted for over a third of the decline in the index for processed goods for intermediate demand. Prices also fell for utility natural gas, gasoline, lubricating oil base stocks, prepared animal feeds, and electric power. Conversely, the index for primary basic organic chemicals advanced 0.8 percent. Prices for plastic resins and materials and for jet fuel also moved up in August. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand fell 3.3 percent in August, the largest decrease since a 3.3-percent decline in June 2012. The broad-based decrease in August was led by the index for unprocessed energy materials, which dropped 4.9 percent. Prices for unprocessed foodstuffs and feedstuffs and for unprocessed nonfood materials less energy fell 3.4 percent and 0.7 percent, respectively. For the 12 months ended in August, the index for unprocessed goods for intermediate demand moved down 0.8 percent, the largest 12-month decrease since a 1.9-percent decline in December 2013.

Product detail: About 40 percent of the August decrease in prices for unprocessed goods for intermediate demand can be attributed to the index for natural gas, which dropped 12.6 percent. The indexes for slaughter barrows and gilts, crude petroleum, slaughter poultry, raw cotton, and slaughter steers and heifers also declined. In contrast, prices for corn advanced 2.6 percent. The indexes for potatoes and aluminum base scrap also moved up in August.

Services for intermediate demand: The index for services for intermediate demand moved up 0.2 percent in August, the third straight advance. Most of the August increase can be traced to prices for services less trade, transportation, and warehousing for intermediate demand, which rose 0.3 percent. Also contributing, but to a lesser extent, the index for transportation and warehousing services for intermediate demand moved up 0.2 percent. In contrast, margins for trade services for intermediate demand declined 0.2 percent. For the 12 months ended in August, the index for services for intermediate demand increased 1.6 percent. (See table C.)

Product detail: In August, over 60 percent of the increase in the index for services for intermediate demand can be traced to prices for business loans (partial), which rose 2.1 percent. The indexes for securities brokerage, dealing, and investment advice; engineering services; traveler accommodation services; paper and plastics wholesaling; deposit services (partial); and airline passenger services also moved higher. Conversely, margins for machinery and equipment parts and supplies wholesaling fell 0.6 percent in August. The indexes for services related to securities brokerage and dealing and for truck transportation of freight also decreased.

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 was unchanged in August after rising 0.2 percent in July. In August, prices for total services inputs to stage 4 intermediate demand edged up 0.1 percent. In contrast, prices for total goods inputs decreased 0.2 percent. (See table D.) Increases in the indexes for securities brokerage, dealing, and investment advice; business loans (partial); architectural and engineering services; jet fuel; and building materials, paint, and hardware wholesaling offset declines in the indexes for diesel fuel, services related to securities brokerage and dealing, gasoline, parts and supplies for machinery and equipment wholesaling, and administrative and general management consulting services. (See table 6.) For the 12 months ended in August, prices for stage 4 intermediate demand rose 1.4 percent.

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.): Prices for stage 3 intermediate demand declined 0.7 percent in August, after increasing 0.6 percent a month earlier. In August, the index for total goods inputs to stage 3 intermediate demand fell 1.3 percent. Conversely, the index for total services inputs advanced 0.2 percent. Lower prices for slaughter barrows and gilts, slaughter poultry, diesel fuel, raw milk, slaughter steers and heifers, and administrative and general management consulting services outweighed increases in the indexes for business loans (partial), plastic resins and materials, and slaughter cows and bulls. For the 12 months ended in August, the index for stage 3 intermediate demand rose 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.): The index for stage 2 intermediate demand fell 1.4 percent in August following a 1.7-percent decrease in July. In August, prices for total goods inputs to stage 2 intermediate demand dropped 2.5 percent. In contrast, the index for total services inputs inched up 0.1 percent. Falling prices for natural gas, crude petroleum, formula feeds, liquefied petroleum gas, raw cotton, and administrative and general management consulting services outweighed advances in the indexes for business loans (partial), corn, and paper and plastics wholesaling. For the 12 months ended in August, prices for stage 2 intermediate demand moved down 1.5 percent, the largest decline since a 1.7-percent decrease in September 2012.

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 moved down 0.2 percent in August compared with a 0.7-percent advance in the previous month. In August, prices for total goods inputs to stage 1 intermediate demand declined 0.4 percent. Conversely, the index for total services inputs moved up 0.3 percent. Decreases in prices for industrial natural gas, services related to securities brokerage and dealing, diesel fuel, industrial electric power, commercial electric power, and gasoline outweighed advances in the indexes for securities brokerage, dealing, and investment advice; primary basic organic chemicals; and traveler accommodation services. For the 12 months ended in August, the index for stage 1 intermediate demand rose 1.7 percent.