October 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 rose 0.2 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This increase followed a 0.1-percent decline in September and no change in August. On an unadjusted basis, the index for final demand advanced 1.5 percent for the 12 months ended in October, the smallest 12-month increase since a 1.2-percent rise in February 2014. (See table A.)

In October, the 0.2-percent rise in final demand prices can be traced to the index for final demand services, which advanced 0.5 percent. In contrast, prices for final demand goods moved down 0.4 percent.

Within intermediate demand, prices for processed goods declined 0.9 percent, the index for unprocessed goods fell 2.4 percent, and prices for services inched up 0.1 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 index for final demand services moved up 0.5 percent in October, the largest increase since a 0.5-percent rise in July 2013. The October advance can be traced to a 1.5-percent increase in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing inched up 0.1 percent. Conversely, the index for final demand transportation and warehousing services edged down 0.1 percent.

Product detail: In October, a 26.1-percent jump in margins for fuels and lubricants retailing accounted for nearly 40 percent of the increase in the index for final demand services. The indexes for machinery, equipment, parts, and supplies wholesaling; food and alcohol retailing; food and alcohol wholesaling; inpatient care; and traveler accommodation services also moved higher. In contrast, prices for airline passenger services declined 0.7 percent. The indexes for loan services (partial) and for chemicals and allied products wholesaling also decreased. (See table 4.)

Final demand goods: The index for final demand goods moved down 0.4 percent in October, the fourth consecutive decrease. The October decline was led by prices for final demand energy, which fell 3.0 percent. The index for final demand goods less foods and energy edged down 0.1 percent. Conversely, prices for final demand foods moved up 1.0 percent.

Product detail: Over 80 percent of the October decline in prices for final demand goods can be attributed to the index for gasoline, which dropped 5.8 percent. Prices for liquefied petroleum gas, prepared animal feeds, home heating oil, diesel fuel, and ethanol also moved lower. In contrast, the index for meats increased 5.3 percent. Prices for electric power, pharmaceutical preparations, and passenger cars also advanced. (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 2015 Model Vehicles, at www.bls.gov/web/ppi/ppimotveh.htm.)

Special grouping, Final demand less foods, energy, and trade: The index for final demand less foods, energy, and trade services edged up 0.1 percent in October after inching down 0.1 percent a month earlier. For the 12 months ended in October, prices for final demand less foods, energy, and trade services rose 1.6 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 moved down 0.3 percent in October, the third consecutive decrease. (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.) The October decline was led by the index for finished consumer energy goods, which dropped 2.7 percent. Conversely, the index for finished consumer foods rose 1.4 percent, and prices for finished goods less foods and energy edged up 0.1 percent. Within finished goods, falling prices for gasoline, liquefied petroleum gas, home heating oil, alcoholic beverages, residential natural gas, and butter outweighed rising prices for meats, residential electric power, 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 0.9 percent in October, the largest decrease since a 1.1-percent decline in March 2013. The broad-based decrease in October was led by the index for processed energy goods, which fell 3.2 percent. Prices for processed foods and feeds and for processed materials less foods and energy moved down 1.8 percent and 0.2 percent, respectively. For the 12 months ended in October, the index for processed goods for intermediate demand rose 0.4 percent. (See table B.)

Product detail: In October, a major contributor to the decline in prices for processed goods for intermediate demand was the index for lubricating oil base stocks, which dropped 12.4 percent. Prices for gasoline, prepared animal feeds, diesel fuel, ethanol, and jet fuel also moved lower. In contrast, the index for electric power advanced 0.7 percent. Prices for meats and for asphalt and tar based roofing and siding products also moved up in October. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand fell 2.4 percent in October following a 0.6-percent advance in September. Leading the decline in prices for unprocessed goods for intermediate demand, the index for unprocessed energy materials decreased 5.5 percent. Prices for unprocessed nonfood materials less energy moved down 2.9 percent. Conversely, the index for unprocessed foodstuffs and feedstuffs rose 1.0 percent. For the 12 months ended in October, the index for unprocessed goods for intermediate demand fell 1.9 percent, the largest 12-month decrease since a 1.9-percent decline in December 2013.

Product detail: Most of the October decline in the index for unprocessed goods for intermediate demand can be attributed to a 9.8-percent drop in prices for crude petroleum. The indexes for iron and steel scrap; nonferrous scrap; nonferrous metal ores; hay, hayseeds, and oilseeds; and natural gas also moved lower. In contrast, prices for slaughter poultry rose 3.5 percent in October. The indexes for coal and industrial sand also moved higher.

Services for intermediate demand: The index for services for intermediate demand edged up 0.1 percent in October after no change in September. In October, almost 90 percent of the advance can be traced to a 0.8-percent increase in prices for trade services for intermediate demand. The index for services less trade, transportation, and warehousing for intermediate demand inched up 0.1 percent. Prices for transportation and warehousing services for intermediate demand were unchanged. For the 12 months ended in October, the index for services for intermediate demand rose 1.6 percent. (See table C.)

Product detail: A 1.4-percent rise in margins for machinery and equipment parts and supplies wholesaling was a major contributor to the October advance in prices for services for intermediate demand. The indexes for management consulting services; metals, minerals, and ores wholesaling; fuels and lubricants retailing; and temporary help services also increased. Conversely, prices for portfolio management fell 1.4 percent in October. The indexes for loan services (partial), chemicals and allied products wholesaling, and airline passenger services 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 declined 0.2 percent in October following no change in both September and August. In October, prices for total goods inputs to stage 4 intermediate demand fell 0.5 percent. In contrast, the index for total services inputs edged up 0.1 percent. (See table D.) Decreasing prices for gasoline, jet fuel, loans services (partial), prepared animal feeds, diesel fuel, and portfolio management outweighed increases in the indexes for machinery and equipment parts and supplies wholesaling, meats, and management consulting services. (See table 6.) For the 12 months ended in October, prices for stage 4 intermediate demand advanced 1.0 percent, the smallest 12-month rise since a 0.6-percent increase in February 2014.

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 moved down 0.2 percent in October after climbing 0.4 percent in September. In October, the index for total goods inputs to stage 3 intermediate demand decreased 0.4 percent. Conversely, prices for total services inputs rose 0.2 percent. Declines in the indexes for gasoline, loan services (partial), diesel fuel, lubricating oil base stocks, prepared animal feeds, and residual fuels outweighed higher prices for management consulting services, slaughter poultry, and slaughter steers and heifers. For the 12 months ended in October, the index for stage 3 intermediate demand increased 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 2.1 percent in October, the fourth straight decrease. In October, prices for total goods inputs to stage 2 intermediate demand dropped 4.0 percent. In contrast, the index for total services inputs advanced 0.5 percent. Lower prices for crude petroleum, prepared animal feeds, gas fuels, loan services (partial), ethanol, and lubricating oil base stocks outweighed increasing indexes for management consulting services; metals, minerals, and ores wholesaling; and corn. For the 12 months ended in October, prices for stage 2 intermediate demand declined 2.9 percent, the largest 12-month decrease since a 6.2-percent drop in July 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.): Prices for stage 1 intermediate demand declined 0.8 percent in October, the largest decrease since a 0.8-percent drop in April 2013. In October, the index for total goods inputs to stage 1 intermediate demand fell 1.5 percent. Conversely, prices for total services inputs rose 0.2 percent. Decreasing indexes for iron and steel scrap, gasoline, nonferrous scrap, lubricating oil base stocks, chemical and allied products wholesaling, and portfolio management outweighed increases in the indexes for traveler accommodation services, electric power, and fuels and lubricants retailing. For the 12 months ended in October, prices for stage 1 intermediate demand moved up 1.4 percent, the smallest 12-month advance since a 1.1-percent rise in March 2014.

PPI Updates Commodity Weight Allocations for the Final Demand-Intermediate Demand Aggregation Structure

Effective with the release of data for January 2015 on February 18, 2015, the Bureau of Labor Statistics will update the weight allocations used to calculate the Producer Price Index (PPI) Final Demand-Intermediate Demand (FD-ID) indexes to more accurately reflect recent sales patterns. While PPI commodity index weights will continue to be based on shipment values from the 2007 economic census, the proportions of these weights allocated to the various FD-ID categories will change. The new allocations will be based primarily on data from the 2007 Input- Output Accounts produced by the Bureau of Economic Analysis.

It is important to note that the allocation update will not change the PPI commodity classification system, reference base, or the FD-ID aggregation structure. It may, however, result in significant shifts in the relative importance figures of commodity components that make up the FD-ID indexes.

Relative importance figures as of December 2014, which will detail this shift from 2002 to 2007 input-output relationships, will be available on February 13, 2015 on the BLS website at www.bls.gov/ppi. This information also may be requested from the Division of Industrial Prices and Price Indexes, Section of Index Analysis and Public Information through e-mail to ppi- info@bls.gov or by calling (202) 691-7705. For further information on this update, contact Jonathan Weinhagen at weinhagen.jonathan@bls.gov or (202) 691-7709.

Recalculated Seasonal Adjustment Factors and Relative Importance Figures to be Available on February 13, 2015

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. The following seasonal information will be available on February 13, 2015 (2 workdays prior to the release of PPI data for January 2015 on February 18):

* Direct seasonal factors for PPI commodity indexes for the year 2015, * Recalculated seasonal factors for the last 5 years (2010-2014) for PPI commodity indexes, * Recalculated seasonal factors for the last 5 years (2010-2014) for PPI Final Demand- Intermediate Demand indexes, * Recalculated seasonal data for the last 5 years (2010-2014) for Final Demand-Intermediate Demand and commodity indexes. This revision to seasonally adjusted indexes for the previous 5 years will be posted to the PPI database on the BLS website.

In addition, the following relative importance tables as of December 2014 also will be available on February 13, 2015:

* 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, e-mail PPI at ppi- info@bls.gov, or call the Division of Industrial Prices and Price Indexes, Section of Index Analysis and Public Information at (202) 691-7705.