August 2017 Producer Price Index

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The Producer Price Index for final demand advanced 0.2 percent in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices edged down 0.1 percent in July and moved up 0.1 percent in June. (See table A.) On an unadjusted basis, the final demand index increased 2.4 percent for the 12 months ended in August.

Three-quarters of the August increase in final demand prices is attributable to the index for final demand goods, which climbed 0.5 percent. Prices for final demand services inched up 0.1 percent.

The index for final demand less foods, energy, and trade services increased 0.2 percent in August following no change in July. For the 12 months ended in August, prices for final demand less foods, energy, and trade services rose 1.9 percent.

Final Demand

Final demand goods: Prices for final demand goods advanced 0.5 percent in August, the largest rise since moving up 0.5 percent in April. Most of the August increase can be traced to the index for final demand energy, which climbed 3.3 percent. Prices for final demand goods less foods and energy moved up 0.2 percent. In contrast, the index for final demand foods fell 1.3 percent.

Product detail: Three-quarters of the August increase in the final demand goods index can be traced to prices for gasoline, which jumped 9.5 percent. The indexes for jet fuel, industrial chemicals, potatoes, home heating oil, and light motor trucks also moved higher. Conversely, prices for meats fell 3.4 percent. The indexes for fresh vegetables (except potatoes) and for plastic resins and materials also declined. (See table 4.)

Final demand services: The index for final demand services edged up 0.1 percent in August after falling 0.2 percent in July. Over 70 percent of the increase can be traced to a 0.1-percent advance in the index for final demand services less trade, transportation, and warehousing. Additionally, prices for final demand transportation and warehousing services climbed 0.3 percent. Margins for final demand trade services were unchanged. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: Over half of the August increase in the index for final demand services can be attributed to prices for consumer loans (partial), which advanced 1.7 percent. The indexes for outpatient care (partial), machinery and equipment wholesaling, truck transportation of freight, and food retailing also moved higher. In contrast, margins for fuels and lubricants retailing fell 6.8 percent. The indexes for chemicals and allied products wholesaling, guestroom rental, and airline passenger services also declined.

Intermediate Demand by Commodity Type

Within intermediate demand in August, prices for processed goods advanced 0.4 percent, the index for unprocessed goods fell 0.7 percent, and prices for services moved up 0.2 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand climbed 0.4 percent in August, the largest rise since a 0.5-percent increase in April. Over 60 percent of the August advance can be traced to prices for processed materials less foods and energy, which moved up 0.4 percent. Also contributing to the increase, the index for processed energy goods jumped 1.4 percent. Conversely, prices for processed foods and feeds decreased 1.0 percent. For the 12 months ended in August, the index for processed goods for intermediate demand rose 4.1 percent.

Product detail: A major factor in the August advance in prices for processed goods for intermediate demand was the index for industrial chemicals, which rose 2.9 percent. Prices for gasoline, jet fuel, residual fuel, nonferrous mill shapes, and liquefied petroleum gas also moved higher. In contrast, the index for meats fell 3.4 percent. Prices for utility natural gas and for cold rolled steel sheet and strip also declined. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand fell 0.7 percent in August following a 0.4-percent decrease in July. The August decline can be attributed to a 5.2-percent drop in prices for unprocessed foodstuffs and feedstuffs. Conversely, the index for unprocessed energy goods climbed 4.0 percent, and prices for unprocessed nonfood materials less energy increased 0.9 percent. For the 12 months ended in August, prices for unprocessed goods for intermediate demand climbed 6.8 percent.

Product detail: Leading the August decrease in the index for unprocessed goods for intermediate demand, prices for slaughter steers and heifers dropped 10.0 percent. The indexes for slaughter poultry, wheat, corn, slaughter barrows and gilts, and natural gas also moved lower. In contrast, crude petroleum prices surged 11.0 percent. The indexes for iron and steel scrap and for potatoes also rose.

Services for intermediate demand: The index for services for intermediate demand increased 0.2 percent in August following a 0.3-percent drop in July. Most of the advance can be traced to prices for services less trade, transportation, and warehousing for intermediate demand, which moved up 0.3 percent. The index for transportation and warehousing services for intermediate demand also rose 0.3 percent. Conversely, margins for trade services for intermediate demand dropped 0.5 percent. For the 12 months ended in August, the index for services for intermediate demand rose 2.6 percent.

Product detail: The August advance in the index for services for intermediate demand can be attributed mainly to prices for business loans (partial), which jumped 5.3 percent. The indexes for services related to securities brokerage and dealing; portfolio management; paper and plastics products wholesaling; building materials, paint, and hardware wholesaling; and truck transportation of freight also increased. In contrast, margins for chemicals and allied products wholesaling fell 4.3 percent. The indexes for securities brokerage, dealing, and investment advice and for machinery and equipment parts and supplies wholesaling also moved down.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: The index for stage 4 intermediate demand inched up 0.1 percent in August following no change a month earlier. In August, prices for both total services and total goods inputs to stage 4 intermediate demand moved up 0.1 percent. Advances in the indexes for business loans (partial), portfolio management, gasoline, paper and plastics products wholesaling, and services related to securities brokerage and dealing outweighed declining indexes for chemicals and allied products wholesaling; machinery and equipment parts and supplies wholesaling; securities brokerage, dealing, and investment advice; and meats. For the 12 months ended in August, prices for stage 4 intermediate demand increased 2.8 percent.

Stage 3 intermediate demand: Prices for stage 3 intermediate demand rose 0.2 percent in August following a 0.1-percent decrease in the previous month. In August, the index for total goods inputs to stage 3 intermediate demand increased 0.2 percent, and prices for total services inputs moved up 0.1 percent. Advances in the indexes for gasoline, jet fuel, business loans (partial), industrial chemicals, services related to securities brokerage and dealing, and heating oil outweighed decreases in the indexes for slaughter steers and heifers, slaughter poultry, and chemicals and allied products wholesaling. For the 12 months ended in August, prices for stage 3 intermediate demand advanced 3.8 percent.

Stage 2 intermediate demand: The index for stage 2 intermediate demand increased 0.5 percent in August following a 0.7-percent decline in the prior month. In August, prices for total goods inputs to stage 2 intermediate demand rose 1.3 percent, while the index for total services inputs was unchanged. Higher prices for crude petroleum, services related to securities brokerage and dealing, portfolio management, liquefied petroleum gas, industrial chemicals, and paint materials outweighed declines in the indexes for securities brokerage, dealing, and investment advice; natural gas; and cold rolled steel sheet and strip. For the 12 months ended in August, prices for stage 2 intermediate demand rose 3.7 percent.

Stage 1 intermediate demand: The index for stage 1 intermediate demand advanced 0.7 percent in August, the largest increase since a similar 0.7-percent rise in February. In August, prices for total goods inputs to stage 1 intermediate demand jumped 1.2 percent, and the index for total services inputs rose 0.3 percent. Increases in prices for industrial chemicals, business loans (partial), iron and steel scrap, gasoline, crude petroleum, and residual fuels outweighed declines in the indexes for chemicals and allied products wholesaling; securities brokerage, dealing, and investment advice; and wheat. For the 12 months ended in August, prices for stage 1 intermediate demand rose 5.7 percent.

PPI Weights to be Updated

In February 2018, with the release of January 2018 Producer Price Index (PPI) data, the Bureau of Labor Statistics will update PPI value weights to more accurately reflect recent production and marketing patterns. The updated weights will be based on shipment values from the year 2012. These value weights come from the Census of Manufactures, the Census of Mining, the Census of Services, and the Census of Agriculture. PPI weights have been based on 2007 Census shipment values since January 2012.

All PPIs will be affected by this weight update, including all the industry net output indexes, as well as indexes for traditional commodity groupings. In addition, weights will be updated from the 2007 to the 2012 Census for all Final demand-Intermediate demand (FD-ID) indexes, durability of product indexes, special commodity-grouping indexes, and input to industry indexes. This weight revision will not change any arithmetic reference bases for indexes, the dates when PPIs were set to 100.

It is important to note that the basic structures of the PPI commodity and FD-ID classification systems will not change as a result of the weight revision. The PPIs classified according to the North American Industry Classification System (NAICS), however, will be updated to reflect 2017 NAICS definitions, as established by the U.S. Census Bureau. The weight update will also result in significant shifts in the relative importance of various industries and products. These shifts will impact aggregate indexes in a manner commensurate with the relative gains and losses in value weights from 2007 to 2012.

In addition, the PPI sample updates normally occurring with the release of October and February data will be combined and released in conjunction with the weight update in February 2018. Commodity and FD-ID relative importance figures for December 2017 will be available two business days prior to the release of January 2018 PPI data. This information will be available on the PPI website at www.bls.gov/ppi or by contacting the PPI Section of Index Analysis and Public Information at ppi- info@bls.gov or (202)691-7705.