December 2016 Producer Price Index

Historical release narrative reproduced from the official public-domain source. Statistical tables, standard technical appendices, administrative material and attendance rosters are omitted; formatting is adapted for reading. Figures retain the release's historical context and may have been revised. Consult the linked source for the complete document.

The Producer Price Index for final demand increased 0.3 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.4 percent in November and were unchanged in October. (See table A.) On an unadjusted basis, the final demand index climbed 1.6 percent in 2016 after falling 1.1 percent in 2015.

In December, nearly 80 percent of the advance in the final demand index is attributable to a 0.7- percent increase in prices for final demand goods. The index for final demand services inched up 0.1 percent.

Prices for final demand less foods, energy, and trade services moved up 0.1 percent in December after rising 0.2 percent in November. In 2016, the index for final demand less foods, energy, and trade services climbed 1.7 percent following a 0.3-percent advance in 2015.

Final Demand

Final demand goods: Prices for final demand goods jumped 0.7 percent in December, the largest increase since a 0.7-percent rise in June. Sixty percent of the December broad-based advance can be traced to the index for final demand energy, which climbed 2.6 percent. Prices for final demand goods less foods and energy rose 0.3 percent, and the final demand foods index increased 0.7 percent.

Product detail: Accounting for almost half of the December jump in final demand goods prices, the index for gasoline climbed 7.8 percent. Prices for light motor trucks, jet fuel, iron and steel scrap, chicken eggs, and liquefied petroleum gas also increased. In contrast, the index for fresh fruits and melons fell 13.6 percent. Prices for residential electric power and for plastic resins and materials also decreased. (See table 4.)

Final demand services: The index for final demand services inched up 0.1 percent in December after increasing 0.5 percent in November. About 70 percent of the December advance can be attributed to prices for final demand services less trade, transportation, and warehousing, which rose 0.2 percent. The index for final demand trade services also advanced 0.2 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, prices for final demand transportation and warehousing services declined 0.4 percent.

Product detail: Most of the December increase in the index for final demand services can be traced to prices for securities brokerage, dealing, investment advice, and related services, which advanced 4.4 percent. The indexes for machinery, equipment, parts, and supplies wholesaling; apparel, footwear, and accessories retailing; food retailing; and health, beauty, and optical goods retailing also moved higher. In contrast, prices for airline passenger services fell 2.4 percent. The indexes for fuels and lubricants retailing, loan services (partial), and apparel wholesaling also decreased.

Intermediate Demand by Commodity Type

Within intermediate demand in December, prices for processed goods advanced 0.5 percent, the index for unprocessed goods jumped 8.3 percent, and prices for services rose 0.4 percent. (See tables B and C.)

Processed goods for intermediate demand: Prices for processed goods for intermediate demand moved up 0.5 percent in December, the fourth straight increase. In December, over 70 percent of the broad-based rise can be traced to the index for processed energy goods, which advanced 2.1 percent. Prices for processed materials less foods and energy and for processed foods and feeds also moved up, rising 0.1 percent and 0.8 percent, respectively. In 2016, the index for processed goods for intermediate demand climbed 1.8 percent compared with a 6.6-percent drop in 2015.

Product detail: A major factor in the December advance in the index for processed goods for intermediate demand was jet fuel prices, which increased 12.1 percent. The indexes for gasoline; paperboard; utility natural gas; liquefied petroleum gas; and natural, processed, and imitation cheese also moved higher. Conversely, prices for plastic resins and materials declined 3.3 percent. The indexes for lubricating oil base stocks and for beef and veal also fell. (See table 5.)

Unprocessed goods for intermediate demand: Prices for unprocessed goods for intermediate demand jumped 8.3 percent in December, the largest increase since a 9.0-percent advance in February 2007. In December, 60 percent of the broad-based increase is attributable to a 14.6-percent advance in the index for unprocessed energy materials. Prices for unprocessed foodstuffs and feedstuffs and for unprocessed nonfood materials less energy also moved higher, rising 5.8 percent and 3.6 percent, respectively. In 2016, the index for unprocessed goods for intermediate demand jumped 13.2 percent following a 25.3-percent drop in 2015.

Product detail: In December, over one-third of the increase in prices for unprocessed goods for intermediate demand can be traced to the index for crude petroleum, which advanced 18.9 percent. Prices for natural gas, raw milk, slaughter barrows and gilts, iron and steel scrap, and slaughter steers and heifers also increased. In contrast, the index for fresh fruits and melons fell 13.6 percent. Prices for coal and phosphates also moved lower.

Services for intermediate demand: The index for services for intermediate demand advanced 0.4 percent in December following a 0.2-percent increase in November. Almost 60 percent of the broad- based December rise can be traced to prices for services less trade, transportation, and warehousing for intermediate demand, which climbed 0.4 percent. Margins for trade services for intermediate demand advanced 1.1 percent, and the index for transportation and warehousing services for intermediate demand edged up 0.1 percent. In 2016, prices for services for intermediate demand rose 2.5 percent after increasing 0.5 percent in 2015.

Product detail: A major factor in the December increase in the index for services for intermediate demand was prices for advertising space sales in newspapers, which rose 9.2 percent. The indexes for securities brokerage, dealing, investment advice, and related services; paper and plastics products wholesaling; machinery and equipment parts and supplies wholesaling; metals, minerals, and ores wholesaling; and courier, messenger, and U.S. postal services also advanced. Conversely, prices for loan services (partial) fell 1.7 percent. The indexes for fuels and lubricants retailing and for airline passenger services also moved lower.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: The index for stage 4 intermediate demand increased 0.4 percent in December after rising 0.2 percent in November. In December, prices for total services inputs to stage 4 intermediate demand moved up 0.4 percent, and the index for total goods inputs advanced 0.3 percent. Increases in the indexes for securities brokerage, dealing, investment advice, and related services; machinery and equipment parts and supplies wholesaling; paper and plastics products wholesaling; gasoline; natural, processed, and imitation cheese; and metals, minerals, and ores wholesaling outweighed decreases in the indexes for loan services (partial), portfolio management, and fresh fruits and melons. In 2016, prices for stage 4 intermediate demand rose 1.7 percent after declining 1.5 percent in 2015.

Stage 3 intermediate demand: The index for stage 3 intermediate demand moved up 1.8 percent in December following a 0.5-percent climb in November. In December, prices for total goods inputs to stage 3 intermediate demand advanced 2.7 percent, and the index for total services inputs rose 0.9 percent. Increases in prices for raw milk; gasoline; slaughter barrows and gilts; advertising space sales in newspapers; jet fuel; and securities brokerage, dealing, investment advice, and related services outweighed declines in the indexes for loan services (partial), fuels and lubricants retailing, and plastic resins and materials. In 2016, prices for stage 3 intermediate demand moved up 1.9 percent after falling 6.7 percent in 2015.

Stage 2 intermediate demand: The index for stage 2 intermediate demand jumped 2.2 percent in December following a 0.5-percent decline in November. In December, prices for total goods inputs to stage 2 intermediate demand rose 4.4 percent, and the index for total services inputs climbed 0.5 percent. Increases in the indexes for crude petroleum; gas fuels; securities brokerage, dealing, investment advice, and related services; paperboard; cable network advertising time sales; and oilseeds outweighed declining prices for plastic resins and materials, portfolio management, and airline passenger services. In 2016, the index for stage 2 intermediate demand moved up 6.5 percent following an 8.3-percent decline in 2015.

Stage 1 intermediate demand: The index for stage 1 intermediate demand climbed 1.0 percent in December after rising 0.7 percent in November. In December, prices for total goods inputs to stage 1 intermediate demand moved up 1.6 percent, and the index for total services inputs advanced 0.2 percent. Increases in prices for iron and steel scrap; securities brokerage, dealing, investment advice, and related services; crude petroleum; gas fuels; nonferrous scrap; and gasoline outweighed declining indexes for loan services (partial), fuels and lubricants retailing, and residual fuel. In 2016, the index for stage 1 intermediate demand rose 4.1 percent after declining 8.6 percent in 2015.

Recalculated Seasonal Adjustment Factors and Relative Importance Figures to be Available on February 10, 2017

Each year with the release of PPI data for January, seasonal adjustment factors and relative importance figures are recalculated to reflect price movements from the just-completed calendar year. The following seasonal information will be available on February 10, 2017 (2 workdays prior to the release of PPI data for January 2017 on February 14):

* Direct seasonal factors for PPI commodity indexes for the year 2017, * Recalculated seasonal factors for the last 5 years (2012-2016) for PPI commodity indexes, * Recalculated seasonal factors for the last 5 years (2012-2016) for PPI Final Demand- Intermediate Demand indexes, * Recalculated seasonal index data for the last 5 years (2012-2016) for Final Demand- Intermediate Demand and commodity indexes. This revision to seasonally adjusted indexes for the previous 5 years will be posted to the PPI database on the BLS website.

In addition, the following relative importance tables as of December 2016 will be available on February 10, 2017:

* Final demand by individual commodities * Final demand by component series * Individual commodities of intermediate demand by commodity type * Component series of intermediate demand by commodity type * Individual commodities of intermediate demand by production flow * Component series of intermediate demand by production flow * Commodities, all levels * Wherever-provided services and construction

To obtain this information, visit the PPI website at www.bls.gov/ppi, or contact the PPI Section of Index Analysis and Public Information at ppi-info@bls.gov or (202) 691-7705.