May 2016 Producer Price Index

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The Producer Price Index for final demand increased 0.4 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.2 percent in April and declined 0.1 percent in March. On an unadjusted basis, the final demand index inched down 0.1 percent for the 12 months ended in May. (See table A.)

In May, over 60 percent of the advance in the final demand index can be traced to prices for final demand goods, which climbed 0.7 percent. The index for final demand services moved up 0.2 percent.

Prices for final demand less foods, energy, and trade services edged down 0.1 percent in May after rising 0.3 percent in April. For the 12 months ended in May, the index for final demand less foods, energy, and trade services increased 0.8 percent.

Final Demand

Final demand goods: The index for final demand goods rose 0.7 percent in May, the largest advance since a 1.2-percent jump in May 2015. Two-thirds of the May 2016 increase can be traced to prices for final demand energy, which climbed 2.8 percent. The indexes for final demand goods less foods and energy and for final demand foods both moved up 0.3 percent.

Product detail: Over one-third of the increase in the index for final demand goods is attributable to gasoline prices, which advanced 6.6 percent. Prices for diesel fuel, iron and steel scrap, fresh and dry vegetables, jet fuel, and oilseeds also moved higher. In contrast, the index for beef and veal fell 5.2 percent. Prices for electric power and for carpets and rugs also decreased. (See table 4.)

Final demand services: The index for final demand services rose 0.2 percent in May after inching up 0.1 percent in April. The May increase can be traced to margins for final demand trade services, which advanced 1.2 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, prices for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services fell 0.2 percent and 0.6 percent, respectively.

Product detail: Leading the rise in prices for final demand services, margins for machinery and equipment wholesaling advanced 3.6 percent. The indexes for apparel, jewelry, footwear, and accessories retailing; inpatient care; residential property brokerage fees and commissions; flooring and floor coverings retailing; and legal services also increased. In contrast, prices for loan services (partial) declined 3.0 percent. The indexes for food retailing and airline passenger services also moved lower.

Intermediate Demand by Commodity Type

Within intermediate demand in May, prices for processed goods advanced 0.8 percent, the index for unprocessed goods increased 1.3 percent, and prices for services fell 0.2 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand climbed 0.8 percent in May, the largest increase since a 0.8-percent rise in May 2015. Half of the broad-based advance in May 2016 can be traced to prices for processed energy goods, which climbed 2.7 percent. The indexes for processed materials less foods and energy and for processed foods and feeds advanced 0.5 percent and 1.1 percent, respectively. For the 12 months ended in May, the index for processed goods for intermediate demand declined 4.6 percent.

Product detail: About one-third of the May rise in prices for processed goods for intermediate demand can be attributed to the diesel fuel index, which jumped 20.0 percent. Prices for primary basic organic chemicals, steel mill products, gasoline, prepared animal feeds, and jet fuel also moved higher. Conversely, the index for electric power fell 0.8 percent. Prices for beef and veal and for paving mixtures and blocks also declined. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand advanced 1.3 percent in May, the third straight increase. In May, a 4.2-percent rise in prices for unprocessed nonfood materials less energy accounted for over three-quarters of the broad-based advance in the index for unprocessed goods for intermediate demand. Prices for unprocessed energy materials and for unprocessed foodstuffs and feedstuffs rose 0.9 percent and 0.1 percent, respectively. For the 12 months ended in May, the index for unprocessed goods for intermediate demand dropped 13.7 percent.

Product detail: Over half of the May advance in prices for unprocessed goods for intermediate demand can be attributed to the index for iron and steel scrap, which rose 16.2 percent. The indexes for oilseeds, corn, natural gas, fresh vegetables (except potatoes), and crude petroleum also moved higher. In contrast, the index for slaughter cattle declined 1.9 percent. Prices for slaughter barrows and gilts and for copper ores also fell.

Services for intermediate demand: The index for services for intermediate demand moved down 0.2 percent in May following a 0.1-percent advance in April. The decline can be traced to prices for services less trade, transportation, and warehousing for intermediate demand, which fell 0.4 percent. Conversely, margins for trade services for intermediate demand increased 0.3 percent. The index for transportation and warehousing services for intermediate demand was unchanged. For the 12 months ended in May, the index for services for intermediate demand advanced 0.9 percent.

Product detail: Accounting for two-thirds of the drop in the index for services for intermediate demand, prices for loan services (partial) declined 3.0 percent. The indexes for metals, minerals, and ores wholesaling; securities brokerage, dealing, investment advice, and related services; investment banking; airline passenger services; and deposit services (partial) also moved lower. In contrast, margins for building materials, paint, and hardware wholesaling increased 2.2 percent. Prices for courier, messenger, and U.S. postal services and for legal services also advanced.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: The index for stage 4 intermediate demand edged up 0.1 percent in May following a 0.3-percent increase in April. In May, prices for total goods inputs to stage 4 intermediate demand rose 0.4 percent. Conversely, the index for total services inputs declined 0.2 percent. (See table D.) Increases in the indexes for diesel fuel; gasoline; steel mill products; building materials, paint, and hardware wholesaling; and primary basic organic chemicals outweighed declines in the indexes for loan services (partial); metals, minerals, and ores wholesaling; electric power; and beef and veal. (See table 6.) For the 12 months ended in May, the index for stage 4 intermediate demand moved down 1.1 percent.

Stage 3 intermediate demand: The index for stage 3 intermediate demand advanced 0.4 percent in May, the largest increase since a 1.2-percent jump in May 2015. In May 2016, prices for total goods inputs to stage 3 intermediate demand climbed 0.8 percent. In contrast, the index for total services inputs moved down 0.1 percent. Rising indexes for gasoline; jet fuel; primary basic organic chemicals; diesel fuel; steel mill products; and courier, messenger, and U.S. postal services outweighed falling prices for slaughter barrows and gilts, slaughter cattle, and loan services (partial). For the 12 months ended in May, the index for stage 3 intermediate demand decreased 5.1 percent.

Stage 2 intermediate demand: The index for stage 2 intermediate demand climbed 0.7 percent in May, the third consecutive increase. In May, prices for total goods inputs to stage 2 intermediate demand jumped 1.9 percent. Conversely, the index for total services inputs edged down 0.1 percent. Higher prices for oilseeds, gas fuels, steel mill products, prepared animal feeds, plastic resins and materials, and property and casualty insurance commissions outweighed decreases in the indexes for securities brokerage, dealing, investment advice, and related services; airline passenger services; and nonferrous wire and cable. For the 12 months ended in May, the index for stage 2 intermediate demand moved down 3.2 percent.

Stage 1 intermediate demand: The index for stage 1 intermediate demand rose 1.0 percent in May, the largest advance since a 1.5-percent rise in January 2014. In May, prices for total goods inputs to stage 1 intermediate demand jumped 2.2 percent. In contrast, the index for total services inputs declined 0.6 percent. Increases in the indexes for diesel fuel; iron and steel scrap; primary basic organic chemicals; steel mill products; gasoline; and building materials, paint, and hardware wholesaling outweighed decreases in the indexes for loan services (partial); metals, minerals, and ores wholesaling; and electric power. For the 12 months ended in May, the index for stage 1 intermediate demand dropped 4.1 percent.