July 2016 Producer Price Index

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

In July, the decline in the final demand index was led by prices for final demand services, which fell 0.3 percent. The index for final demand goods decreased 0.4 percent.

Prices for final demand less foods, energy, and trade services were unchanged in July after rising 0.3 percent in June. For the 12 months ended in July, the index for final demand less foods, energy, and trade services increased 0.8 percent.

Final Demand

Final demand services: The index for final demand services fell 0.3 percent in July, the largest decline since moving down 0.3 percent in March. The July decrease can be traced to margins for final demand trade services, which fell 1.3 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, prices for final demand services less trade, transportation, and warehousing advanced 0.2 percent, and the index for final demand transportation and warehousing services increased 0.1 percent.

Product detail: Nearly 60 percent of the decrease in prices for final demand services is attributable to margins for apparel, jewelry, footwear, and accessories retailing, which fell 6.0 percent. The indexes for machinery and equipment wholesaling; health, beauty, and optical goods retailing; food retailing; loan services (partial); and automotive fuels and lubricants retailing also declined. In contrast, prices for traveler accommodation services climbed 3.9 percent. The indexes for chemicals and allied products wholesaling and for securities brokerage, dealing, investment advice, and related services also moved higher. (See table 4.)

Final demand goods: The index for final demand goods declined 0.4 percent in July following three straight increases. Almost half of the decrease can be traced to prices for final demand foods, which fell 1.1 percent. The index for final demand energy moved down 1.0 percent. Prices for final demand goods less foods and energy were unchanged.

Product detail: A major factor in the decrease in the index for final demand goods was prices for beef and veal, which fell 9.8 percent. Prices for gasoline, corn, motor vehicles, oilseeds, and iron and steel scrap also moved lower. Conversely, the index for utility natural gas advanced 4.3 percent. Prices for eggs for fresh use and nonferrous scrap also increased.

Intermediate Demand by Commodity Type

Within intermediate demand in July, prices for processed goods increased 0.2 percent, the index for unprocessed goods fell 0.4 percent, and prices for services rose 0.3 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand moved up 0.2 percent in July, the third consecutive advance. Nearly three-quarters of the July increase can be traced to prices for processed energy goods, which rose 0.8 percent. The index for processed materials less foods and energy inched up 0.1 percent. Prices for processed foods and feeds were unchanged. For the 12 months ended in July, the index for processed goods for intermediate demand fell 3.7 percent.

Product detail: About half of the July advance in the index for processed goods for intermediate demand can be attributed to prices for utility natural gas, which increased 4.3 percent. The indexes for lubricating oil base stocks, residual fuels, industrial electric power, semifinished steel mill products, and natural cheese (except cottage cheese) also moved higher. Conversely, prices for gasoline dropped 6.6 percent. The indexes for primary basic organic chemicals and for beef and veal also decreased. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand declined 0.4 percent in July following four straight increases. Most of the decrease can be traced to a 3.6-percent drop in prices for unprocessed foodstuffs and feedstuffs. The index for unprocessed nonfood materials less energy moved down 0.8 percent. In contrast, prices for unprocessed energy materials rose 5.0 percent. For the 12 months ended in July, the index for unprocessed goods for intermediate demand fell 8.7 percent.

Product detail: Leading the July decrease in prices for unprocessed goods for intermediate demand, the index for corn dropped 22.2 percent. Prices for crude petroleum, oilseeds, slaughter livestock, coal, and iron and steel scrap also moved lower. Conversely, the index for natural gas surged 40.3 percent. Prices for nonferrous metal ores and raw milk also advanced.

Services for intermediate demand: The index for services for intermediate demand increased 0.3 percent in July following a 0.8-percent rise in June. Nearly 60 percent of the broad-based July advance can be traced to prices for services less trade, transportation, and warehousing for intermediate demand, which climbed 0.2 percent. The indexes for trade services for intermediate demand and for transportation and warehousing services for intermediate demand moved up 0.4 percent and 0.3 percent, respectively. For the 12 months ended in July, the index for services for intermediate demand increased 1.6 percent.

Product detail: About three-fifths of the July increase in the index for services for intermediate demand is attributable to prices for securities brokerage, dealing, investment advice, and related services, which rose 1.9 percent. The indexes for chemicals and allied products wholesaling; television advertising time sales; metals, minerals, and ores wholesaling; deposit services (partial); and courier, messenger, and U.S. postal services also increased. In contrast, prices for loan services (partial) fell 1.5 percent. The indexes for machinery and equipment parts and supplies wholesaling and for passenger car rental also decreased.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: The index for stage 4 intermediate demand was unchanged in July after increasing 0.7 percent in June. In July, prices for total services inputs to stage 4 intermediate demand rose 0.1 percent. Conversely, the index for total goods inputs fell 0.1 percent. Increases in the indexes for chemicals and allied products wholesaling; securities brokerage, dealing, investment advice, and related services; metals, minerals, and ores wholesaling; industrial electric power; and natural cheese (except cottage cheese) offset declines in the indexes for corn, machinery and equipment parts and supplies wholesaling, beef and veal, gasoline, and loan services (partial). For the 12 months ended in July, the index for stage 4 intermediate demand moved down 0.5 percent. Stage 3 intermediate demand: The index for stage 3 intermediate demand was unchanged in July after increasing 0.9 percent in June. In July, the index for total services inputs to stage 3 intermediate demand rose 0.3 percent. In contrast, prices for total goods inputs declined 0.3 percent. Increases in the indexes for securities brokerage, dealing, investment advice, and related services; raw milk; chemicals and allied products wholesaling; metals, minerals, and ores wholesaling; and courier, messenger, and U.S. postal services offset lower prices for gasoline, primary basic organic chemicals, slaughter livestock, agricultural chemicals and chemical products, and passenger car rental. For the 12 months ended in July, the index for stage 3 intermediate demand decreased 3.9 percent.

Stage 2 intermediate demand: The index for stage 2 intermediate demand rose 0.7 percent in July, the fifth consecutive increase. In July, prices for total goods inputs to stage 2 intermediate demand moved up 1.1 percent. The index for total services inputs advanced 0.5 percent. Higher prices for natural gas; securities brokerage, dealing, investment advice, and related services; cable network advertising time sales; thermoplastic resins and materials; semifinished steel mill products; and lubricating oil base stocks outweighed decreases in the indexes for crude petroleum, oilseeds, and portfolio management. For the 12 months ended in July, the index for stage 2 intermediate demand fell 0.6 percent.

Stage 1 intermediate demand: The index for stage 1 intermediate demand was unchanged in July after increasing 1.2 percent in June. In July, the index for total services inputs to stage 1 intermediate demand advanced 0.3 percent. Conversely, prices for total goods inputs fell 0.1 percent. Increases in the indexes for chemicals and allied products wholesaling; natural gas; nonferrous scrap; diesel fuel; and securities brokerage, dealing, investment advice, and related services offset declining prices for primary basic organic chemicals, corn, iron and steel scrap, loan services (partial), and gasoline. For the 12 months ended in July, the index for stage 1 intermediate demand fell 3.2 percent.