July 2015 Producer Price Index

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The Producer Price Index for final demand advanced 0.2 percent in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.4 percent in June and 0.5 percent in May. On an unadjusted basis, the final demand index moved down 0.8 percent for the 12 months ended in July, the sixth straight 12-month decline. (See table A.)

In July, the increase in the final demand index can be traced to prices for final demand services, which climbed 0.4 percent. In contrast, the index for final demand goods edged down 0.1 percent.

Within intermediate demand, prices for processed goods moved down 0.2 percent, the index for unprocessed goods fell 2.9 percent, and prices for services advanced 0.2 percent. (See tables B and C.)

Final Demand

Final demand services: The index for final demand services moved up 0.4 percent in July, the largest rise since a 0.6-percent increase in October 2014. In July, 60 percent of the broad-based advance can be traced to a 0.4-percent rise in the index for final demand services less trade, transportation, and warehousing. Margins for final demand trade services also climbed 0.4 percent, and the index for final demand transportation and warehousing services moved up 0.2 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: Over 40 percent of the July increase in the index for final demand services is attributable to prices for guestroom rental, which jumped 9.9 percent. The indexes for automotive fuels and lubricants retailing; health, beauty, and optical goods retailing; securities brokerage, dealing, investment advice, and related services; computer hardware, software, and supplies retailing; and transportation of passengers (partial) also moved higher. Conversely, margins for apparel, footwear, and accessories retailing declined 4.2 percent. The indexes for loan services (partial) and truck transportation of freight also fell. (See table 4.)

Final demand goods: The index for final demand goods edged down 0.1 percent in July after rising 0.7 percent in June. The decrease is mostly attributable to a 0.6-percent decline in prices for final demand energy. The index for final demand foods inched down 0.1 percent, and prices for final demand goods less foods and energy were unchanged.

Product detail: A major factor in the July decrease in prices for final demand goods was the index for residential natural gas, which declined 2.4 percent. Prices for chicken eggs, home heating oil, pork, and nonferrous metals also moved lower. In contrast, the index for gasoline advanced 1.5 percent. Prices for corn, motor vehicles, and basic organic chemicals also increased.

Special grouping, Final demand less foods, energy, and trade: The index for final demand less foods, energy, and trade services rose 0.2 percent in July after climbing 0.3 percent in June. For the 12 months ended in July, prices for final demand less foods, energy, and trade services increased 0.9 percent.

Intermediate Demand by Commodity Type

Processed goods for intermediate demand: The index for processed goods for intermediate demand decreased 0.2 percent in July following a 0.7-percent rise in the prior month. The decline is attributable to prices for processed energy goods, which fell 1.5 percent. Conversely, the indexes for processed foods and feeds and for processed materials less foods and energy moved up 0.9 percent and 0.1 percent, respectively. For the 12 months ended in July, the index for processed goods for intermediate demand decreased 6.6 percent, the ninth consecutive 12-month decline. (See table B.)

Product detail: In July, a 14.8-percent drop in prices for lubricating oil base stocks accounted for two-thirds of the decrease in the index for processed goods for intermediate demand. Prices for nonferrous metals, natural gas to electric utilities, diesel fuel, jet fuel, and pork also declined. In contrast, the index for soybean cake and meal rose 15.8 percent. Prices for basic organic chemicals and gasoline also increased. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand moved down 2.9 percent in July, the largest decrease since a 3.7-percent drop in February 2015. Over three-quarters of the broad-based decline in July can be traced to prices for unprocessed energy materials, which fell 6.2 percent. The index for unprocessed foodstuffs and feedstuffs moved down 1.2 percent, and prices for unprocessed nonfood materials less energy decreased 0.5 percent. For the 12 months ended in July, the index for unprocessed goods for intermediate demand dropped 22.7 percent.

Product detail: In July, a 12.3-percent drop in crude petroleum prices accounted for three-quarters of the decline in the index for unprocessed goods for intermediate demand. Prices for slaughter chickens, slaughter cattle, ungraded chicken eggs, nonferrous metals, and slaughter barrows and gilts also decreased. Conversely, the index for corn jumped 22.9 percent. Prices for unprocessed finfish and coal also advanced.

Services for intermediate demand: The index for services for intermediate demand rose 0.2 percent in July following a 0.4-percent increase in June. Sixty percent of the July advance is attributable to margins for trade services for intermediate demand, which moved up 0.6 percent. The index for transportation and warehousing services for intermediate demand climbed 0.5 percent. Prices for services less trade, transportation, and warehousing for intermediate demand were unchanged. For the 12 months ended in July, the index for services for intermediate demand moved up 1.1 percent, the smallest 12-month increase since a 1.0-percent rise in April 2014. (See table C.)

Product detail: In July, a 3.1-percent advance in margins for building materials, paint, and hardware wholesaling was a major factor in the increase in prices for services for intermediate demand. The indexes for securities brokerage, dealing, investment advice, and related services; cable network advertising time sales; guestroom rental; food and alcohol wholesaling; and courier, messenger, and U.S. postal services also moved higher. In contrast, prices for loan services (partial) fell 2.4 percent. The indexes for chemicals and allied products wholesaling and for air transportation of freight also decreased.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: The index for stage 4 intermediate demand edged up 0.1 percent in July, the third consecutive increase. In July, prices for total services inputs to stage 4 intermediate demand advanced 0.1 percent, and the index for total goods inputs was unchanged. (See table D.) Increases in the indexes for securities brokerage, dealing, investment advice, and related services; corn; building materials, paint, and hardware wholesaling; food and alcohol wholesaling; and unprocessed finfish outweighed lower prices for loans services (partial), nonferrous metals, diesel fuel, and administrative and general management consulting services. (See table 6.) For the 12 months ended in July, the stage 4 intermediate demand index decreased 1.1 percent, the seventh straight 12-month decline.

Stage 3 intermediate demand: The index for stage 3 intermediate demand fell 0.3 percent in July following a 0.7-percent advance in June. In July, prices for total goods inputs to stage 3 intermediate demand decreased 0.7 percent. Conversely, the index for total services inputs climbed 0.3 percent. Lower prices for slaughter chickens, slaughter cattle, ungraded chicken eggs, slaughter barrows and gilts, jet fuel, and loan services (partial) outweighed higher prices for securities brokerage, dealing, investment advice, and related services; basic organic chemicals; and raw milk. For the 12 months ended in July, the stage 3 intermediate demand index declined 4.8 percent, the seventh straight 12- month decrease.

Stage 2 intermediate demand: The index for stage 2 intermediate demand moved down 0.6 percent in July after 3 consecutive increases. In July, prices for total goods inputs to stage 2 intermediate demand fell 2.1 percent. In contrast, the index for total services inputs rose 0.6 percent. Lower prices for crude petroleum, gas fuels, nonferrous metals, plastic resins and materials, lubricating oil base stocks, and administrative and general management consulting services outweighed advances in the indexes for securities brokerage, dealing, investment advice, and related services; cable network advertising time sales; and corn. For the 12 months ended in July, prices for stage 2 intermediate demand dropped 11.9 percent.

Stage 1 intermediate demand: The index for stage 1 intermediate demand climbed 0.2 percent in July, the third straight advance. In July, prices for total services inputs to stage 1 intermediate demand rose 0.2 percent, and prices for total goods inputs edged up 0.1 percent. Increases in the indexes for guestroom rental; basic organic chemicals; corn; securities brokerage, dealing, investment advice, and related services; soybean cake and meal; and building materials, paint, and hardware wholesaling outweighed lower prices for loan services (partial), nonferrous metals, and diesel fuel. For the 12 months ended in July, the stage 1 intermediate demand index declined 8.1 percent, the ninth consecutive 12-month decrease.