March 2018 Producer Price Index

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The Producer Price Index for final demand advanced 0.3 percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.2 percent in February and 0.4 percent in January. (See table A.) On an unadjusted basis, the final demand index increased 3.0 percent for the 12 months ended in March.

In March, 70 percent of the rise in the final demand index is attributable to a 0.3-percent advance in prices for final demand services. The index for final demand goods also climbed 0.3 percent.

The index for final demand less foods, energy, and trade services rose 0.4 percent in March, the same as in both February and January. For the 12 months ended in March, prices for final demand less foods, energy, and trade services increased 2.9 percent, the largest advance 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 March, the same as in both February and January. Over 70 percent of the broad-based advance in March can be traced to the index for final demand services less trade, transportation, and warehousing, which climbed 0.3 percent. Prices for final demand transportation and warehousing services rose 0.6 percent, and the index for final demand trade services increased 0.2 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: A major factor in the March advance in prices for final demand services was the index for outpatient care (partial), which climbed 0.4 percent. The indexes for machinery, equipment, parts, and supplies wholesaling; cable and satellite subscriber services; airline passenger services; food and alcohol wholesaling; and hospital inpatient care also moved higher. In contrast, margins for automotive fuels and lubricants retailing fell 10.4 percent. The indexes for apparel, footwear, and accessories retailing and wireless telecommunications services also decreased. (See table 4.)

Final demand goods: Prices for final demand goods moved up 0.3 percent in March after edging down 0.1 percent in February. Most of the increase can be traced to prices for final demand foods, which advanced 2.2 percent. The index for final demand goods less foods and energy climbed 0.3 percent. Conversely, prices for final demand energy declined 2.1 percent.

Product detail: Over half of the March increase in the index for final demand goods is attributable to a 31.5-percent jump in prices for fresh and dry vegetables. The indexes for chicken eggs, meats, unprocessed finfish, motor vehicles, and iron and steel scrap also advanced. In contrast, prices for gasoline fell 3.7 percent. The indexes for primary basic organic chemicals and for fresh fruits and melons also moved lower.

Intermediate Demand by Commodity Type

Within intermediate demand in March, prices for processed goods decreased 0.3 percent, the index for unprocessed goods fell 4.8 percent, and prices for services advanced 0.3 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand moved down 0.3 percent in March, the largest decline since a 0.9-percent drop in February 2016. The March decrease can be traced to prices for processed energy goods, which fell 3.1 percent. Conversely, the index for processed materials less foods and energy increased 0.3 percent, and prices for processed foods and feeds rose 1.4 percent. For the 12 months ended in March, the index for processed goods for intermediate demand climbed 4.6 percent.

Product detail: A major factor in the March decline in prices for processed goods for intermediate demand was the index for utility natural gas, which dropped 7.3 percent. Prices for primary basic organic chemicals, electric power, gasoline, diesel fuel, and jet fuel also moved lower. In contrast, the index for steel mill products rose 1.9 percent. Prices for fabricated structural metal products and prepared animal feeds also increased. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand moved down 4.8 percent in March, the largest decrease since a 4.9-percent decline in November 2015. Most of the March drop is attributable to prices for unprocessed energy materials, which fell 11.6 percent. In addition, the index for unprocessed foodstuffs and feedstuffs declined 1.0 percent. Conversely, prices for unprocessed nonfood materials less energy advanced 1.5 percent. For the 12 months ended in March, the index for unprocessed goods for intermediate demand increased 4.2 percent.

Product detail: Leading the March decrease in the index for unprocessed goods for intermediate demand, natural gas prices dropped 32.1 percent. The indexes for slaughter hogs, slaughter steers and heifers, raw milk, slaughter poultry, and wastepaper also moved lower. In contrast, prices for iron and steel scrap rose 4.3 percent. The indexes for crude petroleum and unprocessed finfish also increased.

Services for intermediate demand: Prices for services for intermediate demand advanced 0.3 percent in March after rising 0.5 percent in the previous month. Nearly three-quarters of the broad-based increase in March can be traced to the index for trade services for intermediate demand, which climbed 1.7 percent. Prices for transportation and warehousing services for intermediate demand and for services less trade, transportation, and warehousing for intermediate demand advanced 0.5 percent and 0.1 percent, respectively. For the 12 months ended in March, the index for services for intermediate demand rose 3.2 percent.

Product detail: In March, over 40 percent of the increase in the index for services for intermediate demand can be traced to margins for machinery and equipment parts and supplies wholesaling, which moved up 3.6 percent. The indexes for hardware, building materials, and supplies retailing; metals, minerals, and ores wholesaling; legal services; paper and plastics products wholesaling; and services related to securities brokerage and dealing (partial) also advanced. Conversely, prices for television advertising time sales declined 2.6 percent. The indexes for securities brokerage, dealing, and investment advice and furnishings wholesaling also moved lower.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: Prices for stage 4 intermediate demand advanced 0.5 percent in March, the third straight increase. In March, the index for total services inputs to stage 4 intermediate demand rose 0.7 percent, and prices for total goods inputs moved up 0.5 percent. (See table D.) Increases in the indexes for machinery and equipment parts and supplies wholesaling; hardware, building materials, and supplies retailing; unprocessed finfish; ready-mix concrete; metals, minerals, and ores wholesaling; and legal services outweighed declines in prices for electric power, primary basic organic chemicals, and nonresidential property management fees. (See table 6.) For the 12 months ended in March, prices for stage 4 intermediate demand moved up 3.6 percent.

Stage 3 intermediate demand: The index for stage 3 intermediate demand fell 0.5 percent in March, the first decline since inching down 0.1-percent in July 2017. In March, prices for total goods inputs to stage 3 intermediate demand decreased 1.4 percent. In contrast, the index for total services inputs climbed 0.4 percent. Declining prices for primary basic organic chemicals, slaughter hogs, slaughter steers and heifers, gasoline, jet fuel, and raw milk outweighed increases in the indexes for machinery and equipment parts and supplies wholesaling, ungraded chicken eggs, and slaughter cows and bulls. For the 12 months ended in March, prices for stage 3 intermediate demand climbed 3.8 percent.

Stage 2 intermediate demand: The index for stage 2 intermediate demand decreased 1.7 percent in March, the largest drop since a 4.3-percent decline in January 2015. In March, prices for total goods inputs to stage 2 intermediate demand fell 4.0 percent. Conversely, the index for total services inputs moved up 0.2 percent. Lower prices for gas fuels; primary basic organic chemicals; utility natural gas; securities brokerage, dealing, and investment advice; commissions from sales of insurance; and wireless telecommunication services outweighed advances in the indexes for hardware, building materials, and supplies retailing; crude petroleum; and steel mill products. For the 12 months ended in March, prices for stage 2 intermediate demand rose 4.3 percent.

Stage 1 intermediate demand: Prices for stage 1 intermediate demand moved down 0.2 percent in March, the first decrease since a 0.6-percent decline in August 2016. In March, the index for total goods inputs to stage 1 intermediate demand fell 0.6 percent. In contrast, prices for total services inputs rose 0.3 percent. Decreases in the indexes for primary basic organic chemicals, gas fuels, diesel fuel, wastepaper, electric power, and wireless telecommunication services outweighed rising indexes for machinery and equipment parts and supplies wholesaling; iron and steel scrap; and metals, minerals, and ores wholesaling. For the 12 months ended in March, prices for stage 1 intermediate demand moved up 5.2 percent.