March 2017 Producer Price Index

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The Producer Price Index for final demand declined 0.1 percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.3 percent in February and 0.6 percent in January. (See table A.) On an unadjusted basis, the final demand index rose 2.3 percent for the 12 months ended March 2017, the largest increase since moving up 2.4 percent for the 12 months ended March 2012.

In March 2017, three-fourths of the decrease in the final demand index is attributable to prices for final demand services, which fell 0.1 percent. The index for final demand goods also inched down 0.1 percent.

Prices for final demand less foods, energy, and trade services edged up 0.1 percent in March, the tenth straight advance. For the 12 months ended in March, the index for final demand less foods, energy, and trade services climbed 1.7 percent.

Final Demand

Final demand services: The index for final demand services inched down 0.1 percent in March following a 0.4-percent increase in February. Over half of the broad-based decline can be traced to prices for final demand services less trade, transportation, and warehousing, which decreased 0.1 percent. Margins for final demand trade services also edged down 0.1 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) The index for final demand transportation and warehousing services fell 0.2 percent.

Product detail: A 4.1-percent drop in the index for loan services (partial) led the March decline in prices for final demand services. The indexes for apparel, footwear, and accessories retailing; securities brokerage, dealing, and investment advice; health, beauty, and optical goods retailing; and truck transportation of freight also moved lower. In contrast, margins for fuels and lubricants retailing jumped 13.8 percent. The indexes for food and alcohol retailing, machinery and equipment parts and supplies wholesaling, and insurance also advanced. (See table 4.)

Final demand goods: The index for final demand goods inched down 0.1 percent in March following 6 straight increases. The decline can be traced to a 2.9-percent drop in prices for final demand energy. Conversely, the indexes for final demand goods less foods and energy and for final demand foods rose 0.4 percent and 0.9 percent, respectively.

Product detail: Leading the March decrease in prices for final demand goods, the gasoline index fell 8.3 percent. Prices for liquefied petroleum gas; jet fuel; hay, hayseeds, and oilseeds; and integrated microcircuits also moved lower. In contrast, the index for motor vehicles rose 0.9 percent. Prices for meats, processed poultry, and electric power also advanced.

Intermediate Demand by Commodity Type

Within intermediate demand in March, prices for processed goods advanced 0.1 percent, the index for unprocessed goods fell 4.2 percent, and prices for services declined 0.2 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand inched up 0.1 percent in March, the seventh consecutive increase. The March advance was led by a 0.7-percent rise in prices for processed materials less foods and energy. The index for processed foods and feeds climbed 0.6 percent. Conversely, prices for processed energy goods decreased 2.7 percent. For the 12 months ended in March, the index for processed goods for intermediate demand moved up 5.3 percent, the largest increase since a 5.7-percent jump for the 12 months ended December 2011.

Product detail: A major factor in the March advance in the index for processed goods for intermediate demand was prices for primary basic organic chemicals, which increased 8.5 percent. The indexes for steel mill products, thermoplastic resins and materials, asphalt, and meats also moved higher. In contrast, prices for gasoline fell 8.3 percent. The indexes for natural gas to electric utilities, natural cheese (except cottage cheese), and inedible fats and oils also decreased. (See table 5.)

Unprocessed goods for intermediate demand: Prices for unprocessed goods for intermediate demand moved down 4.2 percent in March, the largest decline since a 4.8-percent drop in November 2015. The March decrease can be attributed to the index for unprocessed energy materials, which fell 14.6 percent. Conversely, prices for unprocessed nonfood materials less energy and for unprocessed foodstuffs and feedstuffs advanced 2.0 percent and 0.8 percent, respectively. For the 12 months ended in March, the index for unprocessed goods for intermediate demand jumped 12.7 percent.

Product detail: Over 70 percent of the March decrease in the index for unprocessed goods for intermediate demand can be traced to prices for natural gas, which fell 30.0 percent. The indexes for crude petroleum; hay, hayseeds, and oilseeds; slaughter barrows and gilts; corn; and construction sand, gravel, and crushed stone also moved lower. In contrast, prices for iron and steel scrap advanced 6.9 percent. The indexes for slaughter cattle and slaughter chickens also increased.

Services for intermediate demand: The index for services for intermediate demand moved down 0.2 percent in March following 5 consecutive increases. The decline was the result of a 0.4-percent decrease in prices for services less trade, transportation, and warehousing for intermediate demand. Conversely, margins for trade services for intermediate demand and the index for transportation and warehousing services for intermediate demand both advanced 0.3 percent. For the 12 months ended in March, prices for services for intermediate demand increased 1.7 percent.

Product detail: Leading the March decrease in the index for services for intermediate demand, prices for securities brokerage, dealing, and investment advice fell 6.8 percent. The indexes for business loans (partial); paper and plastics products wholesaling; legal services; building materials, paint, and hardware wholesaling; and truck transportation of freight also declined. In contrast, margins for machinery and equipment parts and supplies wholesaling advanced 2.7 percent. The indexes for services related to securities brokerage and dealing and for courier, messenger, and U.S. postal services also moved higher.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: The index for stage 4 intermediate demand edged down 0.1 percent in March following 6 consecutive increases. In March, prices for total services inputs to stage 4 intermediate demand moved down 0.2 percent. Conversely, the index for total goods inputs advanced 0.2 percent. (See table D.) Decreases in the indexes for securities brokerage, dealing, and investment advice; business loans (partial); paper and plastics products wholesaling; gasoline; and diesel fuel outweighed increases in the indexes for primary basic organic chemicals; machinery and equipment parts and supplies wholesaling; hardware, building materials, and supplies retailing; and portfolio management. (See table 6.) For the 12 months ended in March, prices for stage 4 intermediate demand rose 2.5 percent.

Stage 3 intermediate demand: Prices for stage 3 intermediate demand inched up 0.1 percent in March, the fifth consecutive advance. In March, the index for total goods inputs to stage 3 intermediate demand rose 0.3 percent. In contrast, prices for total services inputs moved down 0.2 percent. Increases in the indexes for primary basic organic chemicals, slaughter cattle, slaughter chickens, steel mill products, and machinery and equipment parts and supplies wholesaling outweighed declines in prices for securities brokerage, dealing, and investment advice; gasoline; slaughter barrows and gilts; and jet fuel. For the 12 months ended in March, the index for stage 3 intermediate demand increased 4.2 percent, the largest advance since a 4.3-percent jump in the 12 months ended January 2012.

Stage 2 intermediate demand: The index for stage 2 intermediate demand fell 1.9 percent in March, the largest decline since a 4.3-percent drop in January 2015. In March, prices for total goods inputs to stage 2 intermediate demand fell 4.4 percent, and the index for total services inputs was unchanged. Lower prices for natural gas; crude petroleum; securities brokerage, dealing, and investment advice; hay, hayseeds, and oilseeds; liquefied petroleum gas; and legal services outweighed increases in prices for thermoplastic resins and materials, steel mill products, and services related to securities brokerage and dealing. For the 12 months ended in March, the index for stage 2 intermediate demand advanced 6.0 percent.

Stage 1 intermediate demand: The index for stage 1 intermediate demand edged down 0.1 percent in March following a 0.6-percent rise in the prior month. In March, prices for total services inputs to stage 1 intermediate demand fell 0.5 percent. Conversely, the index for total goods inputs moved up 0.3 percent. Decreases in prices for securities brokerage, dealing, and investment advice; business loans (partial); natural gas; diesel fuel; and gasoline outweighed advances in the indexes for primary basic organic chemicals, iron and steel scrap, wastepaper, and fuels and lubricants retailing. For the 12 months ended in March, the index for stage 1 intermediate demand increased 6.5 percent.