October 2017 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 0.4 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.4 percent in September and 0.2 percent in August. (See table A.) On an unadjusted basis, the final demand index increased 2.8 percent for the 12 months ended in October, the largest rise since an advance of 2.8 percent for the 12 months ended February 2012.

Within final demand in October, prices for final demand services rose 0.5 percent, and the index for final demand goods moved up 0.3 percent.

Prices for final demand less foods, energy, and trade services rose 0.2 percent in October. For the 12 months ended in October, the index for final demand less foods, energy, and trade services advanced 2.3 percent.

Final Demand

Final demand services: The index for final demand services rose 0.5 percent in October, the largest increase since moving up 0.5 percent in April. Three-quarters of the October advance can be traced to a 1.1-percent rise 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 increased 0.8 percent. Prices for final demand services less trade, transportation, and warehousing edged up 0.1 percent.

Product detail: Nearly half of the increase in prices for final demand services can be attributed to margins for fuels and lubricants retailing, which surged 24.9 percent. The indexes for machinery and equipment wholesaling; transportation of passengers (partial); apparel, jewelry, footwear, and accessories retailing; chemicals and allied products wholesaling; and portfolio management also advanced. In contrast, margins for food retailing moved down 2.1 percent. The indexes for food and alcohol wholesaling and for loan services (partial) also decreased. (See table 4.)

Final demand goods: Prices for final demand goods moved up 0.3 percent in October, the third straight increase. Over two-thirds of the October rise can be traced to the index for final demand goods less foods and energy, which advanced 0.3 percent. Prices for final demand foods moved up 0.5 percent. The index for final demand energy was unchanged.

Product detail: Almost half of the rise in the final demand goods index was the result of higher prices for pharmaceutical preparations, which increased 2.1 percent. The indexes for industrial chemicals, fresh and dry vegetables, diesel fuel, beef and veal, and tobacco products also advanced. Conversely, prices for gasoline fell 4.6 percent. The indexes for light motor trucks and pork also moved lower. (In accordance with usual practice, most new-model-year passenger cars and light motor trucks were introduced into the PPI in October. See Report on Quality Changes for 2018 Model Vehicles, at www.bls.gov/web/ppi/ppimotveh.htm.)

Intermediate Demand by Commodity Type

Within intermediate demand in October, prices for processed goods advanced 1.0 percent, the index for unprocessed goods was unchanged, and prices for services moved up 0.3 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand climbed 1.0 percent in October, the largest rise since a 1.2-percent increase in January. Sixty percent of the October advance can be traced to prices for processed materials less foods and energy, which moved up 0.8 percent. The indexes for processed energy goods and for processed foods and feeds rose 1.8 percent and 0.8 percent, respectively. For the 12 months ended in October, prices for processed goods for intermediate demand jumped 5.0 percent.

Product detail: Over one-third of the October advance in prices for processed goods for intermediate demand can be attributed to the index for industrial chemicals, which rose 5.2 percent. Prices for diesel fuel, commercial electric power, industrial electric power, plastic resins and materials, and prepared animal feeds also moved higher. In contrast, the index for gasoline fell 4.6 percent. Prices for pork and for paper boxes and containers also declined. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand was unchanged in October following a 0.4-percent decline in September. In October, prices for unprocessed energy materials rose 2.1 percent, and the index for unprocessed foodstuffs and feedstuffs moved up 0.4 percent. Conversely, prices for unprocessed nonfood materials less energy fell 3.7 percent. For the 12 months ended in October, the index for unprocessed goods for intermediate demand climbed 7.7 percent.

Product detail: In October, prices for crude petroleum increased 6.6 percent. The indexes for slaughter cattle; ungraded chicken eggs; fresh vegetables (except potatoes); and construction sand, gravel, and crushed stone also advanced. In contrast, prices for carbon steel scrap fell 9.5 percent. The indexes for wastepaper, slaughter hogs, natural gas, and raw milk also moved lower.

Services for intermediate demand: The index for services for intermediate demand advanced 0.3 percent in October, the third consecutive increase. Nearly half of the broad-based rise in October can be traced to prices for services less trade, transportation, and warehousing for intermediate demand, which moved up 0.2 percent. The indexes for trade services for intermediate demand and for transportation and warehousing services for intermediate demand both increased 0.5 percent. For the 12 months ended in October, prices for services for intermediate demand moved up 2.9 percent, the largest rise since a 2.9-percent advance in December 2012.

Product detail: A major factor in the October increase in the index for services for intermediate demand was prices for securities brokerage, dealing, and investment advice, which moved up 2.0 percent. The indexes for metals, minerals, and ores wholesaling; portfolio management; fuels and lubricants retailing; chemicals and allied products wholesaling; and transportation of passengers (partial) also moved higher. Conversely, prices for loan services (partial) fell 2.0 percent. The indexes for television advertising time sales and for food and alcohol wholesaling also declined.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: The index for stage 4 intermediate demand moved up 0.5 percent in October, the fifth consecutive rise. In October, prices for total goods inputs to stage 4 intermediate demand climbed 0.6 percent, and the index for total services inputs advanced 0.3 percent. (See table D.) Increases in the indexes for diesel fuel; portfolio management; industrial chemicals; commercial electric power; metals, minerals, and ores wholesaling; and industrial electric power outweighed declines in the indexes for loan services (partial), gasoline, and food and alcohol wholesaling. (See table 6.) For the 12 months ended in October, prices for stage 4 intermediate demand climbed 3.4 percent, the largest increase since a 3.6-percent advance in December 2011.

Stage 3 intermediate demand: Prices for stage 3 intermediate demand moved up 0.4 percent in October, the same as in the prior month. In October, the index for total goods inputs to stage 3 intermediate demand advanced 0.7 percent, and prices for total services inputs climbed 0.3 percent. Increases in the indexes for industrial chemicals; diesel fuel; metals, minerals, and ores wholesaling; ungraded chicken eggs; jet fuel; and fuels and lubricants retailing outweighed decreases in the indexes for gasoline, slaughter hogs, and food and alcohol wholesaling. For the 12 months ended in October, prices for stage 3 intermediate demand advanced 5.2 percent, the largest rise since moving up 5.4 percent in December 2011.

Stage 2 intermediate demand: The index for stage 2 intermediate demand advanced 1.0 percent in October following a 0.2-percent rise a month earlier. In October, prices for total goods inputs to stage 2 intermediate demand increased 1.5 percent, and the index for total services inputs moved up 0.5 percent. Higher prices for crude petroleum; plastic resins and materials; industrial chemicals; portfolio management; securities brokerage, dealing, and investment advice; and staffing services outweighed declines in the indexes for television advertising time sales, carbon steel scrap, and wastepaper. For the 12 months ended in October, prices for stage 2 intermediate demand climbed 3.6 percent.

Stage 1 intermediate demand: Prices for stage 1 intermediate demand moved up 0.6 percent in October, the fifth straight advance. In October, the index for total goods inputs to stage 1 intermediate demand increased 0.7 percent, and prices for total services inputs climbed 0.5 percent. Advances in the indexes for industrial chemicals; diesel fuel; metals, minerals, and ores wholesaling; fuels and lubricants retailing; commercial electric power; and chemicals and allied products wholesaling outweighed decreases in prices for carbon steel scrap, wastepaper, and loan services (partial). For the 12 months ended in October, the index for stage 1 intermediate demand climbed 6.7 percent, the largest increase since a 6.8-percent rise in March 2017.

Recalculated Seasonal Adjustment Factors and Relative Importance Figures to be Available on February 13, 2018

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 13, 2018 (2 workdays prior to the release of PPI data for January 2018 on February 15, 2018):

* Direct seasonal factors for PPI commodity indexes for the year 2018, * Recalculated seasonal factors for the last 5 years (2013-2017) for PPI commodity indexes, * Recalculated seasonal factors for the last 5 years (2013-2017) for PPI Final Demand- Intermediate Demand indexes, * Recalculated seasonal index data for the last 5 years (2013-2017) 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, which include values for December 2017, will be available on February 13, 2018:

* 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

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.

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.