September 2017 Producer Price Index

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The Producer Price Index for final demand advanced 0.4 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved up 0.2 percent in August and edged down 0.1 percent in July. (See table A.) On an unadjusted basis, the final demand index increased 2.6 percent for the 12 months ended in September, the largest rise since an advance of 2.8 percent for the 12 months ended February 2012.

Within final demand in September, prices for final demand services rose 0.4 percent, and the index for final demand goods climbed 0.7 percent.

Prices for final demand less foods, energy, and trade services increased 0.2 percent in September, the same as in August. For the 12 months ended in September, the index for final demand less foods, energy, and trade services advanced 2.1 percent.

Final Demand

Final demand services: The index for final demand services increased 0.4 percent in September, the largest rise since moving up 0.5 percent in April. Over 60 percent of the September advance can be traced to a 0.8-percent increase in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) The index for final demand transportation and warehousing services jumped 1.0 percent. Prices for final demand services less trade, transportation, and warehousing edged up 0.1 percent.

Product detail: Nearly 30 percent of the increase in prices for final demand services can be attributed to margins for machinery, equipment, parts, and supplies wholesaling, which rose 1.3 percent. The indexes for apparel, footwear, and accessories retailing; health, beauty, and optical goods retailing; truck transportation of freight; deposit services (partial); and food and alcohol wholesaling also advanced. In contrast, prices for residential real estate loans (partial) fell 2.6 percent. The indexes for automobiles and automobile parts retailing and for apparel wholesaling also declined. (See table 4.)

Final demand goods: Prices for final demand goods rose 0.7 percent in September, the largest increase since moving up 1.0 percent in January. Over 80 percent of the September advance can be traced to the index for final demand energy, which climbed 3.4 percent. (Higher energy prices were likely the result of reduced refining capacity in the Gulf Coast area due to Hurricane Harvey.) Prices for final demand goods less foods and energy moved up 0.3 percent. The index for final demand foods was unchanged.

Product detail: Two-thirds of the September increase in the final demand goods index can be attributed to prices for gasoline, which jumped 10.9 percent. The indexes for jet fuel, motor vehicles, diesel fuel, fresh and dry vegetables, and chicken eggs also moved higher. Conversely, prices for young chickens fell 4.7 percent. The indexes for electric power and integrated microcircuits 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 fell 0.4 percent, and prices for services edged up 0.1 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand climbed 0.5 percent in September, the largest rise since a 0.5-percent increase in April. Most of the September advance can be traced to prices for processed energy goods, which moved up 2.4 percent. The index for processed materials less foods and energy rose 0.2 percent. In contrast, prices for processed foods and feeds decreased 0.6 percent. For the 12 months ended in September, the index for processed goods for intermediate demand advanced 4.3 percent.

Product detail: A major factor in the September increase in prices for processed goods for intermediate demand was the index for diesel fuel, which rose 4.8 percent. Prices for gasoline, jet fuel, nonferrous mill shapes, processed eggs, and nonferrous wire and cable also moved higher. Conversely, the index for young chickens fell 4.7 percent. Prices for commercial electric power and biological products also declined. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand moved down 0.4 percent in September, the third consecutive decline. The September decrease can be traced primarily to a 1.7-percent drop in prices for unprocessed foodstuffs and feedstuffs. The index for unprocessed energy materials fell 0.8 percent. In contrast, prices for unprocessed nonfood materials less energy advanced 2.0 percent. For the 12 months ended in September, the index for unprocessed goods for intermediate demand increased 7.0 percent.

Product detail: Leading the September decline in the index for unprocessed goods for intermediate demand, prices for slaughter hogs dropped 18.4 percent. The indexes for natural gas, raw milk, slaughter poultry, corn, and wastepaper also moved lower. Conversely, prices for nonferrous metal ores advanced 6.5 percent. The indexes for oilseeds and crude petroleum also rose.

Services for intermediate demand: The index for services for intermediate demand edged up 0.1 percent in September following a 0.2-percent advance in August. Leading the September increase, margins for trade services for intermediate demand rose 0.4 percent. Prices for transportation and warehousing services for intermediate demand also moved higher, climbing 0.6 percent. In contrast, the index for services less trade, transportation, and warehousing for intermediate demand inched down 0.1 percent. For the 12 months ended in September, prices for services for intermediate demand advanced 2.7 percent.

Product detail: A 1.8-percent rise in margins for machinery and equipment parts and supplies wholesaling was a major contributor to the September increase in prices for services for intermediate demand. The indexes for deposit services (partial); food and alcohol wholesaling; securities brokerage, dealing, and investment advice; and courier, messenger, and U.S. postal services also moved higher. Conversely, prices for loan services (partial) fell 2.9 percent. The indexes for metals, minerals, and ores wholesaling; television advertising time sales; and marketing consulting services also decreased.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: The index for stage 4 intermediate demand advanced 0.1 percent in September, the same as in the prior month. In September, prices for both total services and total goods inputs to stage 4 intermediate demand rose 0.2 percent. Increases in the indexes for machinery and equipment parts and supplies wholesaling, gasoline, diesel fuel, deposit services (partial), and chemicals and allied products wholesaling outweighed declines in the indexes for loan services (partial); metals, minerals, and ores wholesaling; commercial electric power; and marketing consulting services. For the 12 months ended in September, prices for stage 4 intermediate demand climbed 3.0 percent.

Stage 3 intermediate demand: Prices for stage 3 intermediate demand moved up 0.4 percent in September, the largest increase since a 0.9-percent jump in February. In September, the index for total goods inputs to stage 3 intermediate demand rose 0.5 percent, and prices for total services inputs climbed 0.2 percent. Advances in the indexes for gasoline, jet fuel, diesel fuel, machinery and equipment parts and supplies wholesaling, food and alcohol wholesaling, and ungraded chicken eggs outweighed declines in the indexes for slaughter hogs; raw milk; and metals, minerals, and ores wholesaling. For the 12 months ended in September, prices for stage 3 intermediate demand climbed 4.3 percent.

Stage 2 intermediate demand: The index for stage 2 intermediate demand advanced 0.2 percent in September following a 0.5-percent rise in August. In September, prices for total goods inputs to stage 2 intermediate demand increased 0.3 percent, and the index for total services inputs inched up 0.1 percent. Higher prices for oilseeds; crude petroleum; nonferrous mill shapes; liquefied petroleum gas; securities brokerage, dealing, and investment advice; and courier, messenger, and U.S. postal services outweighed decreases in the indexes for natural gas, television advertising time sales, and marketing consulting services. For the 12 months ended in September, prices for stage 2 intermediate demand moved up 3.6 percent.

Stage 1 intermediate demand: Prices for stage 1 intermediate demand rose 0.5 percent in September after climbing 0.7 percent in August. In September, the index for total goods inputs to stage 1 intermediate demand jumped 0.7 percent. In contrast, prices for total services inputs edged down 0.1 percent. Increases in the indexes for diesel fuel, carbon steel scrap, nonferrous scrap, gasoline, deposit services (partial), and chemicals and allied products wholesaling outweighed declines in the indexes for loan services (partial); metals, minerals, and ores wholesaling; and wastepaper. For the 12 months ended in September, prices for stage 1 intermediate demand rose 6.0 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.