September 2016 Producer Price Index

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The Producer Price Index for final demand rose 0.3 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices were unchanged in August and declined 0.4 percent in July. On an unadjusted basis, the final demand index increased 0.7 percent for the 12 months ended in September, the largest 12-month rise since advancing 0.9 percent in December 2014. (See table A.)

In September, over three-quarters of the advance in final demand prices can be traced to a 0.7- percent increase in the final demand goods index. Prices for final demand services inched up 0.1 percent.

The index for final demand less foods, energy, and trade services moved up 0.3 percent in September, the same as in August. For the 12 months ended in September, prices for final demand less foods, energy, and trade services rose 1.5 percent, the largest increase since climbing 1.5 percent for the 12 months ended November 2014.

Final Demand

Final demand goods: The index for final demand goods advanced 0.7 percent in September following a 0.4-percent decline in August. Over 60 percent of the broad-based rise can be attributed to a 2.5-percent increase in prices for final demand energy. The index for final demand goods less foods and energy moved up 0.3 percent, and prices for final demand foods advanced 0.5 percent.

Product detail: Thirty percent of the September rise in the index for final demand goods can be traced to a 5.3-percent increase in gasoline prices. The indexes for pharmaceutical preparations, fresh and dry vegetables, diesel fuel, jet fuel, and residential natural gas also moved higher. In contrast, prices for beef and veal fell 3.7 percent. The indexes for carbon steel scrap and asphalt also declined. (See table 4.)

Final demand services: In September, prices for final demand services inched up 0.1 percent, the same as in August. The September advance was led by the index for final demand services less trade, transportation, and warehousing, which rose 0.2 percent. Prices for final demand transportation and warehousing services increased 1.3 percent. Conversely, the final demand trade services index decreased 0.4 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: A major factor in the September rise in the index for final demand services was prices for securities brokerage, dealing, investment advice, and related services, which advanced 3.9 percent. The indexes for airline passenger services, machinery and equipment wholesaling, food and alcohol retailing, and hospital inpatient care also moved higher. In contrast, margins for apparel, jewelry, footwear, and accessories retailing fell 5.2 percent. The indexes for guestroom rental, machinery and equipment parts and supplies wholesaling, and apparel wholesaling also declined.

Intermediate Demand by Commodity Type

Within intermediate demand in September, prices for processed goods advanced 0.5 percent, the index for unprocessed goods rose 1.3 percent, and prices for services increased 0.4 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand rose 0.5 percent in September after edging down 0.1 percent in August. Over three-fourths of the advance is attributable to prices for processed energy goods, which climbed 2.5 percent. The index for processed materials less foods and energy increased 0.3 percent. Conversely, prices for processed foods and feeds fell 0.7 percent. For the 12 months ended in September, the index for processed goods for intermediate demand moved down 1.2 percent.

Product detail: Over a quarter of the September rise in prices for processed goods for intermediate demand can be traced to the diesel fuel index, which jumped 8.6 percent. Prices for gasoline, basic organic chemicals, jet fuel, plastic resins and materials, and industrial gases also moved higher. In contrast, the index for prepared animal feeds fell 5.4 percent. Prices for asphalt and semifinished steel mill products also decreased. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand increased 1.3 percent in September following two consecutive declines. The rise is attributable to a 7.4-percent jump in prices for unprocessed energy materials. Conversely, the indexes for unprocessed foodstuffs and feedstuffs and unprocessed nonfood materials less energy fell 1.5 percent and 1.4 percent, respectively. For the 12 months ended in September, prices for unprocessed goods for intermediate demand decreased 4.8 percent.

Product detail: Most of the September advance in the index for unprocessed goods for intermediate demand can be traced to prices for crude petroleum, which climbed 9.1 percent. The indexes for natural gas, raw milk, coal, fresh vegetables (except potatoes), and unprocessed finfish also moved higher. In contrast, slaughter livestock prices dropped 8.1 percent. The indexes for carbon steel scrap and slaughter chickens also decreased.

Services for intermediate demand: The index for services for intermediate demand rose 0.4 percent in September after no change in August. Most of the advance can be attributed to prices for services less trade, transportation, and warehousing for intermediate demand, which climbed 0.5 percent. The index for transportation and warehousing services for intermediate demand rose 0.6 percent. Conversely, margins for trade services for intermediate demand fell 0.2 percent. For the 12 months ended in September, the index for services for intermediate demand moved up 2.5 percent, the largest 12-month increase since a 2.9-percent advance in December 2012.

Product detail: A 2.1-percent advance in the index for deposit services (partial) was a factor in the rise in prices for services for intermediate demand. The indexes for securities brokerage, dealing, investment advice, and related services; airline passenger services; gross rents for office buildings; metals, minerals, and ores wholesaling; and staffing services also moved higher. In contrast, margins for machinery and equipment parts and supplies wholesaling fell 2.7 percent. The indexes for business loans (partial) and for broadcasting and network television advertising time sales also declined.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: The index for stage 4 intermediate demand increased 0.3 percent in September after remaining unchanged in July and August. In September, prices for both total goods inputs and total services inputs to stage 4 intermediate demand advanced 0.3 percent. Increases in the indexes for diesel fuel; securities brokerage, dealing, investment advice, and related services; gross rents for office buildings; gasoline; deposit services (partial); and paper and plastics products wholesaling outweighed declines in the indexes for machinery and equipment parts and supplies wholesaling, business loans (partial), and beef and veal. For the 12 months ended in September, prices for stage 4 intermediate demand moved up 0.5 percent, the first 12-month increase since a similar 0.5-percent advance in December 2014.

Stage 3 intermediate demand: The index for stage 3 intermediate demand increased 0.6 percent in September following a 0.6-percent drop in August. In September, prices for total services inputs to stage 3 intermediate demand advanced 0.5 percent, and the index for total goods inputs rose 0.4 percent. Increases in the indexes for securities brokerage, dealing, investment advice, and related services; raw milk; gasoline; jet fuel; diesel fuel; and basic organic chemicals outweighed declines in the indexes for slaughter cattle, slaughter barrows and gilts, and machinery and equipment parts and supplies wholesaling. For the 12 months ended in September, prices for stage 3 intermediate demand fell 1.6 percent.

Stage 2 intermediate demand: The index for stage 2 intermediate demand increased 1.1 percent in September following a 0.7-percent decline in August. In September, prices for total goods inputs to stage 2 intermediate demand rose 2.1 percent, and the index for total services inputs advanced 0.5 percent. Increases in the indexes for crude petroleum; gas fuels; securities brokerage, dealing, investment advice, and related services; plastic resins and materials; airline passenger services; and staffing services outweighed decreases in the indexes for guestroom rental, marketing consulting services, and prepared animal feeds. For the 12 months ended in September, prices for stage 2 intermediate demand moved up 1.9 percent, the first 12-month advance since June 2014.

Stage 1 intermediate demand: The index for stage 1 intermediate demand increased 0.6 percent in September following a 0.3-percent decline in August. In September, prices for total goods inputs to stage 1 intermediate demand rose 0.7 percent, and the index for total services inputs advanced 0.5 percent. Higher prices for diesel fuel; basic organic chemicals; securities brokerage, dealing, investment advice, and related services; airline passenger services; crude petroleum; and gas fuels outweighed declines in the indexes for carbon steel scrap, guestroom rental, and nonferrous scrap. For the 12 months ended in September, prices for stage 1 intermediate demand fell 0.4 percent.