December 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 fell 0.1 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.4 percent in both November and October. (See table A.) On an unadjusted basis, the final demand index climbed 2.6 percent in 2017 after a 1.7-percent rise in 2016.

Most of the December decline in the final demand index is attributable to a 0.2-percent decrease in prices for final demand services. The index for final demand goods was unchanged.

Prices for final demand less foods, energy, and trade services edged up 0.1 percent in December after rising 0.4 percent in November. In 2017, the index for final demand less foods, energy, and trade services climbed 2.3 percent following a 1.8-percent advance in 2016.

Final Demand

Final demand services: The index for final demand services moved down 0.2 percent in December following nine consecutive increases. Most of the decrease can be traced to a 0.6-percent decline in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand transportation and warehousing services fell 0.4 percent. Conversely, the index for final demand services less trade, transportation, and warehousing inched up 0.1 percent.

Product detail: A major factor in the December decline in prices for final demand services was the index for automotive fuels and lubricants retailing, which fell 10.7 percent. The indexes for loan services (partial); airline passenger services; apparel, footwear, and accessories retailing; legal services; and health, beauty, and optical goods retailing also moved lower. In contrast, prices for inpatient care advanced 0.7 percent. The indexes for truck transportation of freight and apparel wholesaling also increased. (See table 4.)

Final demand goods: Prices for final demand goods were unchanged in December following a 1.0- percent increase in November. The index for final demand less foods and energy advanced 0.2 percent. Conversely, prices for final demand foods declined 0.7 percent. The index for final demand energy was unchanged.

Product detail: In December, prices for basic organic chemicals advanced 3.9 percent. The indexes for jet fuel, diesel fuel, home heating oil, and processed young chickens also moved higher. In contrast, prices for beef and veal fell 6.3 percent. The indexes for gasoline, fresh and dry vegetables, liquefied petroleum gas, and turbines and turbine generator sets also moved lower.

Intermediate Demand by Commodity Type

Within intermediate demand in December, prices for processed goods increased 0.5 percent, the index for unprocessed goods rose 2.1 percent, and prices for services edged down 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 December, the fifth straight increase. Seventy percent of the December rise is attributable to a 0.5-percent advance in prices for processed materials less foods and energy. The index for processed energy goods also moved higher, increasing 0.8 percent. Conversely, prices for processed foods and feeds inched down 0.1 percent. In 2017, the index for processed goods for intermediate demand climbed 5.1 percent, compared with a 1.8-percent advance in 2016.

Product detail: In December, a major factor in the rise in the index for processed goods for intermediate demand was prices for plastic resins and materials, which increased 3.1 percent. The indexes for basic organic chemicals, diesel fuel, jet fuel, residual fuels, and prepared animal feeds also moved higher. In contrast, beef and veal prices fell 6.3 percent. The indexes for gasoline and plastic construction products also declined. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand increased 2.1 percent in December following a 3.2-percent rise in November. Nearly three- fourths of the broad-based December advance is attributable to prices for unprocessed energy materials, which climbed 4.7 percent. The indexes for unprocessed nonfood materials less energy and for unprocessed foodstuffs and feedstuffs also moved higher, increasing 1.4 percent and 0.5 percent, respectively. In 2017, prices for unprocessed goods for intermediate demand rose 5.2 percent after advancing 13.0 percent in 2016.

Product detail: Over half of the December increase in the index for unprocessed goods for intermediate demand can be traced to natural gas prices, which jumped 13.7 percent. The indexes for carbon steel scrap, crude petroleum, raw milk, slaughter barrows and gilts, and slaughter steers and heifers also moved higher. Conversely, corn prices decreased 3.3 percent. The indexes for fresh vegetables (except potatoes) and nonferrous scrap also moved lower.

Services for intermediate demand: The index for services for intermediate demand edged down 0.1 percent in December after a 0.7-percent jump in November. The decrease can be traced to prices for services less trade, transportation, and warehousing for intermediate demand, which fell 0.1 percent. The intermediate demand indexes for both trade services and for transportation and warehousing services were unchanged. In 2017, prices for services for intermediate demand increased 2.9 percent after rising 2.6 percent in 2016.

Product detail: Leading the December decrease in the index for services for intermediate demand, prices for loan services (partial) dropped 5.4 percent. The indexes for legal services, airline passenger services, machinery and equipment parts and supplies wholesaling, and staffing services also moved lower. In contrast, prices for securities brokerage, dealing, investment advice, and related services increased 1.4 percent. The indexes for television advertising time sales; metals, minerals, and ores wholesaling; and truck transportation of freight also rose.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: The index for stage 4 intermediate demand declined 0.2 percent in December following a 0.6-percent jump in November. In December, prices for total services inputs to stage 4 intermediate demand fell 0.3 percent, and the index for total goods inputs was unchanged. (See table D.) Decreases in the indexes for loan services (partial), legal services, machinery and equipment parts and supplies wholesaling, gasoline, plastic construction products, and beef and veal outweighed rising prices for diesel fuel; portfolio management; and securities brokerage, dealing, investment advice, and related services. (See table 6.) In 2017, the index for stage 4 intermediate demand increased 3.3 percent after climbing 1.7 percent in 2016.

Stage 3 intermediate demand: Prices for stage 3 intermediate demand moved up 0.5 percent in December, the fifth consecutive rise. In December, the index for total goods inputs to stage 3 intermediate demand climbed 1.0 percent, and prices for total services inputs were unchanged. Increases in the indexes for jet fuel; raw milk; basic organic chemicals; slaughter barrows and gilts; and securities brokerage, dealing, investment advice, and related services outweighed decreases in the indexes for gasoline, loan services (partial), and machinery and equipment parts and supplies wholesaling. In 2017, prices for stage 3 intermediate demand advanced 4.8 percent following a 2.0- percent rise in 2016.

Stage 2 intermediate demand: The index for stage 2 intermediate demand increased 0.9 percent in December, the sixth straight advance. In December, prices for total goods inputs to stage 2 intermediate demand advanced 1.8 percent, and the index for total services inputs was unchanged. Higher prices for natural gas; plastic resins and materials; crude petroleum; cable network advertising time sales; securities brokerage, dealing, investment advice, and related services; and basic organic chemicals outweighed declines in the indexes for legal services, airline passenger services, and liquefied petroleum gas. In 2017, prices for stage 2 intermediate demand increased 3.8 percent after advancing 6.4 percent in 2016.

Stage 1 intermediate demand: Prices for stage 1 intermediate demand moved up 0.7 percent in December, the same as in November. In December, the index for total goods inputs to stage 1 intermediate demand advanced 1.4 percent. Conversely, prices for total services inputs fell 0.4 percent. Higher prices for basic organic chemicals; carbon steel scrap; diesel fuel; deposit services (partial); natural gas; and securities brokerage, dealing, investment advice, and related services outweighed decreases in the indexes for loan services (partial), airline passenger services, and gasoline. In 2017, prices for stage 1 intermediate demand climbed 5.8 percent following a 4.4- percent advance in 2016.

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.