March 2016 Producer Price Index

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The Producer Price Index for final demand fell 0.1 percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices decreased 0.2 percent in February and advanced 0.1 percent in January. On an unadjusted basis, the final demand index moved down 0.1 percent for the 12 months ended in March. (See table A.)

The decrease in the final demand index in March can be traced to prices for final demand services, which declined 0.2 percent. In contrast, prices for final demand goods rose 0.2 percent.

The index for final demand less foods, energy, and trade services was unchanged in March after four consecutive advances. For the 12 months ended in March, prices for final demand less foods, energy, and trade services rose 0.9 percent.

Final Demand

Final demand services: The index for final demand services fell 0.2 percent in March, the first decline since October 2015. In March, a 0.5-percent decrease in margins for final demand trade services accounted for over 80 percent of the broad-based decline in prices for final demand services. (Trade indexes measure changes in margins received by wholesalers and retailers.) The indexes for final demand transportation and warehousing services and for final demand services less trade, transportation, and warehousing fell 0.3 percent and 0.1 percent, respectively.

Product detail: Three-quarters of the March decrease in prices for final demand services can be attributed to margins for machinery, equipment, parts, and supplies wholesaling, which moved down 1.9 percent. The indexes for chemicals and allied products wholesaling, consumer loans (partial), physician care, fuels and lubricants retailing, and truck transportation of freight also decreased. Conversely, margins for food and alcohol retailing increased 2.3 percent. Prices for traveler accommodation services and airline passenger services also rose. (See table 4.)

Final demand goods: The index for final demand goods moved up 0.2 percent in March following eight straight declines. Most of the increase can be traced to prices for final demand energy, which rose 1.8 percent. The index for final demand goods less foods and energy inched up 0.1 percent. In contrast, prices for final demand foods declined 0.9 percent.

Product detail: Leading the March rise in prices for final demand goods, the gasoline index jumped 7.1 percent. Prices for carbonated soft drinks in bottles and cans, home heating oil, jet fuel, iron and steel scrap, and pharmaceutical preparations also moved higher. Conversely, the index for fresh and dry vegetables dropped 12.0 percent. Prices for electric power and motor vehicles also decreased.

Intermediate Demand by Commodity Type

Within intermediate demand in March, prices for processed goods moved down 0.2 percent, the index for unprocessed goods rose 2.5 percent, and prices for services fell 0.3 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand fell 0.2 percent in March, the ninth straight decline. Sixty percent of the March decrease can be traced to prices for processed materials less foods and energy, which moved down 0.1 percent. The index for processed foods and feeds fell 0.6 percent. Prices for processed energy goods were unchanged. For the 12 months ended in March, the index for processed goods for intermediate demand fell 5.5 percent.

Product detail: Over 80 percent of the March decline in prices for processed goods for intermediate demand can be attributed to the index for primary basic organic chemicals, which dropped 5.5 percent. Prices for electric power, utility natural gas, lubricating oil base stocks, industrial gases, and processed eggs also moved lower. In contrast, the gasoline index climbed 7.1 percent. Prices for diesel fuel and primary nonferrous metals also increased. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand advanced 2.5 percent in March following eight consecutive decreases. Nearly 80 percent of the rise is attributable to prices for unprocessed energy goods, which increased 6.1 percent. The index for unprocessed nonfood materials less energy moved up 2.1 percent. Conversely, prices for unprocessed foodstuffs and feedstuffs inched down 0.1 percent. For the 12 months ended in March, the index for unprocessed goods for intermediate demand fell 14.1 percent, the smallest 12-month decline since an 8.7-percent decrease in December 2014.

Product detail: Leading the March advance in prices for unprocessed goods for intermediate demand, the crude petroleum index surged 40.7 percent. Prices for slaughter steers and heifers, iron and steel scrap, nonferrous metal ores, coal, and nonferrous scrap also moved higher. In contrast, the index for corn declined 3.8 percent. Prices for natural gas and for hides and skins also fell.

Services for intermediate demand: The index for services for intermediate demand moved down 0.3 percent in March following four consecutive increases. Over three-quarters of the decrease can be traced to margins for trade services for intermediate demand, which fell 1.1 percent. Prices for transportation and warehousing services for intermediate demand declined 0.2 percent, while the index for services less trade, transportation, and warehousing for intermediate demand was unchanged. For the 12 months ended in March, the index for services for intermediate demand climbed 1.4 percent.

Product detail: Over half of the March decrease in prices for services for intermediate demand can be traced to margins for chemicals and allied products wholesaling, which dropped 6.9 percent. The indexes for business loans (partial); securities brokerage, dealing, and investment advice; parts and supplies for machinery and equipment wholesaling; passenger car rental; and truck transportation of freight also moved lower. Conversely, prices for staffing services advanced 1.3 percent. The indexes for airline passenger services and for food and alcohol wholesaling also moved higher.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: The index for stage 4 intermediate demand moved down 0.3 percent in March following a 0.1-percent decline a month earlier. In March, prices for total services inputs to stage 4 intermediate demand decreased 0.5 percent, and the index for total goods inputs edged down 0.1 percent. (See table D.) Decreases in the indexes for chemicals and allied products wholesaling; business loans (partial); parts and supplies for machinery and equipment wholesaling; securities brokerage, dealing, and investment advice; electric power; and strawberries outweighed increases in prices for gasoline, staffing services, and concrete products. (See table 6.) For the 12 months ended in March, prices for stage 4 intermediate demand fell 1.1 percent.

Stage 3 intermediate demand: The index for stage 3 intermediate demand was unchanged in March following a 0.9-percent decline in February. In March, prices for total goods inputs to stage 3 intermediate demand advanced 0.3 percent. In contrast, the index for total services inputs decreased 0.3 percent. Higher prices for slaughter steers and heifers, gasoline, jet fuel, raw milk, and advertising in periodicals and newspapers offset declines in the indexes for chemicals and allied products wholesaling, primary basic organic chemicals, ungraded chicken eggs, business loans (partial), and slaughter poultry. For the 12 months ended in March, the index for stage 3 intermediate demand moved down 4.2 percent.

Stage 2 intermediate demand: The index for stage 2 intermediate demand advanced 0.5 percent in March following a 0.3-percent decline in February. In March, prices for total goods inputs to stage 2 intermediate demand climbed 1.3 percent, and the index for total services inputs edged up 0.1 percent. Increasing prices for crude petroleum, staffing services, liquefied petroleum gas, services related to securities brokerage and dealing, coal, and hot rolled steel sheet and strip outweighed decreases in the indexes for natural gas; securities brokerage, dealing, and investment advice; and hay, hayseeds, and oilseeds. For the 12 months ended in March, prices for stage 2 intermediate demand fell 3.7 percent, the smallest 12-month decline since a 3.0-percent decrease in November 2014.

Stage 1 intermediate demand: The index for stage 1 intermediate demand was unchanged in March following eight consecutive declines. In March, prices for total goods inputs to stage 1 intermediate demand moved up 0.5 percent. Conversely, the index for total services inputs declined 0.6 percent. Higher prices for iron and steel scrap, crude petroleum, nonferrous scrap, diesel fuel, and services related to securities brokerage and dealing offset decreases in the indexes for chemicals and allied products wholesaling; primary basic organic chemicals; business loans (partial); natural gas; and securities brokerage, dealing, and investment advice. For the 12 months ended in March, the index for stage 1 intermediate demand fell 5.4 percent, the smallest 12-month decline since a 2.4-percent decrease in December 2014.