February 2018 Producer Price Index

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The Producer Price Index for final demand advanced 0.2 percent in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.4 percent in January and were unchanged in December. (See table A.) On an unadjusted basis, the final demand index increased 2.8 percent for the 12 months ended in February.

In February, the rise in final demand prices is attributable to a 0.3-percent advance in the index for final demand services. In contrast, prices for final demand goods edged down 0.1 percent.

The index for final demand less foods, energy, and trade services climbed 0.4 percent in February, the same as in January. For the 12 months ended in February, prices for final demand less foods, energy, and trade services increased 2.7 percent, the largest rise since 12-month percent change data were available in August 2014.

Final Demand

Final demand services: Prices for final demand services moved up 0.3 percent in February, the same as in January. Most of the February advance can be traced to the index for final demand services less trade, transportation, and warehousing, which increased 0.3 percent. Prices for final demand transportation and warehousing services also moved higher, rising 0.9 percent. Conversely, margins for final demand trade services declined 0.2 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: A major factor in the February advance in prices for final demand services was the index for traveler accommodation services, which climbed 3.7 percent. The indexes for automotive fuels and lubricants retailing, food retailing, bundled wired telecommunications access services, hospital inpatient care, and airline passenger services also moved higher. In contrast, margins for machinery, equipment, parts, and supplies wholesaling fell 1.4 percent. The indexes for apparel, jewelry, footwear, and accessories retailing and for cable and satellite subscriber services also decreased. (See table 4.)

Final demand goods: Prices for final demand goods edged down 0.1 percent in February, the first decline since falling 0.5 percent in May 2017. In February, a 0.4-percent decrease in the index for final demand foods and a 0.5-percent decline in prices for final demand energy slightly outweighed a 0.2-percent increase in the index for final demand goods less foods and energy.

Product detail: Leading the February decrease in the index for final demand goods, prices for fresh and dry vegetables dropped 27.1 percent. The indexes for gasoline, light motor trucks, diesel fuel, and liquefied petroleum gas also moved lower. Conversely, prices for primary basic organic chemicals jumped 7.2 percent. The indexes for chicken eggs, residential natural gas, and beef and veal also advanced.

Intermediate Demand by Commodity Type

Within intermediate demand in February, prices for processed goods increased 0.7 percent, the index for unprocessed goods jumped 2.8 percent, and prices for services advanced 0.5 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand climbed 0.7 percent in February, the seventh straight rise. Nearly two-thirds of the broad- based increase in February can be traced to a 0.7-percent advance in prices for processed materials less foods and energy. The indexes for processed energy goods and for processed foods and feeds also moved higher, rising 0.8 percent and 1.2 percent, respectively. For the 12 months ended in February, the index for processed goods for intermediate demand advanced 4.8 percent.

Product detail: A major factor in the February increase in prices for processed goods for intermediate demand was the index for primary basic organic chemicals, which rose 7.2 percent. Prices for utility natural gas, prepared animal feeds, industrial electric power, softwood lumber, and residual fuels also moved higher. In contrast, the index for diesel fuel fell 4.1 percent. Prices for thermoplastic resins and plastics materials and for pork also declined. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand increased 2.8 percent in February, the largest advance since moving up 3.6 percent in January 2017. Three-quarters of the February rise can be attributed to the index for unprocessed energy materials, which climbed 5.4 percent. The index for unprocessed foodstuffs and feedstuffs increased 2.1 percent. Conversely, prices for unprocessed nonfood materials less energy fell 0.3 percent. For the 12 months ended in February, the index for unprocessed goods for intermediate demand climbed 5.6 percent.

Product detail: Leading the February advance in the index for unprocessed goods for intermediate demand, natural gas prices jumped 23.5 percent. The indexes for slaughter steers and heifers, grains, oilseeds, ungraded chicken eggs, and carbon steel scrap also moved higher. In contrast, prices for corrugated wastepaper declined 12.5 percent. The indexes for crude petroleum and raw milk also moved lower.

Services for intermediate demand: Prices for services for intermediate demand advanced 0.5 percent in February, the largest rise since moving up 0.6 percent in October 2017. Over 80 percent of the broad-based increase in February can be traced to the index for services less trade, transportation, and warehousing for intermediate demand, which climbed 0.5 percent. Prices for transportation and warehousing services for intermediate demand and for trade services for intermediate demand advanced 0.5 percent and 0.1 percent, respectively. For the 12 months ended in February, the index for services for intermediate demand rose 2.9 percent.

Product detail: In February, prices for legal services moved up 1.4 percent. The indexes for portfolio management; transportation of freight and mail; management, scientific, and technical consulting services; gross rents for retail properties; and chemicals and allied products wholesaling also advanced. Conversely, the index for machinery and equipment parts and supplies wholesaling declined 1.0 percent. Prices for advertising sales in print and for tax preparation and planning also moved lower.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: Prices for stage 4 intermediate demand advanced 0.3 percent in February, the same rate as in January. In February, the index for total services inputs to stage 4 intermediate demand rose 0.4 percent, and prices for total goods inputs moved up 0.2 percent. (See table D.) Increases in the indexes for portfolio management, legal services, gross rents for retail properties, chemicals and allied products wholesaling, engineering services, and primary basic organic chemicals outweighed declines in the indexes for machinery and equipment parts and supplies wholesaling; diesel fuel; and natural, processed, and imitation cheese. (See table 6.) For the 12 months ended in February, prices for stage 4 intermediate demand moved up 3.0 percent.

Stage 3 intermediate demand: The index for stage 3 intermediate demand rose 0.7 percent in February, the seventh straight advance. In February, prices for total goods inputs to stage 3 intermediate demand moved up 1.0 percent, and the index for total services inputs climbed 0.3 percent. Increases in the indexes for slaughter steers and heifers, primary basic organic chemicals, ungraded chicken eggs, jet fuel, slaughter barrows and gilts, and chemical and allied products wholesaling outweighed decreases in the indexes for raw milk, gasoline, and machinery and equipment parts and supplies wholesaling. For the 12 months ended in February, prices for stage 3 intermediate demand climbed 4.2 percent.

Stage 2 intermediate demand: The index for stage 2 intermediate demand increased 1.3 percent in February, the largest rise since a 1.4-percent advance in April 2017. In February, prices for total goods inputs to stage 2 intermediate demand moved up 2.4 percent, and the index for total services inputs climbed 0.5 percent. Higher prices for natural gas, prepared animal feeds, oilseeds, legal services, portfolio management, and transportation of freight and mail outweighed declines in the indexes for crude petroleum, thermoplastic resins and plastics materials, and tax preparation and planning. For the 12 months ended in February, prices for stage 2 intermediate demand rose 4.6 percent.

Stage 1 intermediate demand: Prices for stage 1 intermediate demand advanced 0.5 percent in February, the ninth straight rise. In February, the indexes for both total goods and total services inputs to stage 1 intermediate demand climbed 0.5 percent. Increases in the indexes for primary basic organic chemicals, natural gas, carbon steel scrap, chemicals and allied products wholesaling, traveler accommodation services, and prepared animal feeds outweighed lower prices for diesel fuel, corrugated wastepaper, and wireless telecommunication services. For the 12 months ended in February, prices for stage 1 intermediate demand moved up 5.5 percent.