July 2020 Producer Price Index

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The Producer Price Index for final demand increased 0.6 percent in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed a 0.2-percent decline in June and a 0.4-percent advance in May. (See table A.) The July increase is the largest rise since a 0.7- percent advance in October 2018. On an unadjusted basis, the final demand index moved down 0.4 percent for the 12 months ended in July.

In July, the advance in the final demand index was led by a 0.5-percent rise in prices for final demand services. The index for final demand goods also moved higher, increasing 0.8 percent.

Prices for final demand less foods, energy, and trade services advanced 0.3 percent in July, the same as in June. For the 12 months ended in July, the index for final demand less foods, energy, and trade services edged up 0.1 percent, following three straight 12-month declines.

Final Demand

Final demand services: The index for final demand services moved up 0.5 percent in July, the largest advance since climbing 0.5 percent in April 2019. In July, about 60 percent of the rise can be traced to a 0.4-percent increase in prices for final demand services less trade, transportation, and warehousing. Margins for final demand trade services also moved higher, advancing 0.8 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) In contrast, prices for final demand transportation and warehousing services fell 0.8 percent.

Product detail: In July, a 7.8-percent rise in the index for portfolio management was a major factor in the advance in prices for final demand services. The indexes for machinery and vehicle wholesaling, automobiles and automobile parts retailing, long-distance motor carrying, legal services, and machinery and equipment parts and supplies wholesaling also moved higher. Conversely, prices for airline passenger services decreased 7.0 percent. The indexes for automotive fuels and lubricants retailing and for guestroom rental also declined. (See table 4.)

Final demand goods: The index for final demand goods rose 0.8 percent in July, the third consecutive advance. Leading the July increase, prices for final demand energy climbed 5.3 percent. The index for final demand goods less foods and energy moved up 0.3 percent. In contrast, prices for final demand foods declined 0.5 percent.

Product detail: Over one-third of the July advance in the index for final demand goods is attributable to gasoline prices, which rose 10.1 percent. The indexes for diesel fuel, home heating oil, electric power, fluid milk products, and industrial chemicals also increased. Conversely, meat prices fell 8.0 percent. The indexes for residential natural gas and carbon steel scrap also decreased.

Intermediate Demand by Commodity Type

Within intermediate demand in July, prices for processed goods rose 1.5 percent, the index for unprocessed goods fell 0.7 percent, and prices for services increased 0.7 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand rose 1.5 percent in July, the largest increase since moving up 1.5 percent in February 2011. Over three-quarters of the July advance can be traced to prices for processed energy goods, which jumped 7.4 percent. The index for processed materials less foods and energy rose 0.5 percent. In contrast, prices for processed foods and feeds decreased 0.7 percent. For the 12 months ended in July, the index for processed goods for intermediate demand fell 3.6 percent.

Product Detail: Nearly half of the July increase in prices for processed goods for intermediate demand can be attributed to the index for diesel fuel, which rose 31.3 percent. Prices for gasoline, industrial chemicals, commercial electric power, softwood lumber, and lubricating oil base stocks also advanced. Conversely, the index for meats fell 8.0 percent. Prices for fabricated structural metal and utility natural gas also decreased. (See table 5.)

Unprocessed goods for intermediate demand: Prices for unprocessed goods for intermediate demand fell 0.7 percent in July following two consecutive increases. The decline can be attributed to a 7.4-percent decrease in the index for unprocessed energy materials. In contrast, prices for unprocessed foodstuffs and feedstuffs rose 4.3 percent, and the index for unprocessed nonfood materials less energy moved up 0.3 percent. For the 12 months ended in July, prices for unprocessed goods for intermediate demand dropped 16.3 percent.

Product detail: Leading the July decline in the index for unprocessed goods for intermediate demand, prices for crude petroleum decreased 13.6 percent. The indexes for slaughter cattle, slaughter hogs, corrugated recyclable paper, carbon steel scrap, and natural gas also fell. Conversely, prices for raw milk jumped 43.7 percent. The indexes for corn and nonferrous metal ores also advanced.

Services for intermediate demand: Prices for services for intermediate demand climbed 0.7 percent in July, the largest increase since moving up 1.0 percent in January 2016. Almost three-fourths of the July advance can be attributed to a 0.8-percent rise in the index for services less trade, transportation, and warehousing for intermediate demand. Margins for trade services for intermediate demand jumped 1.1 percent. In contrast, prices for transportation and warehousing services for intermediate demand decreased 0.4 percent. For the 12 months ended in July, the index for services for intermediate demand fell 1.0 percent.

Product detail: A major factor in the July increase in the index for services for intermediate demand was a 6.6-percent rise in prices for television advertising time sales. The indexes for portfolio management; machinery and equipment parts and supplies wholesaling; hardware, building materials, and supplies retailing; legal services; and long-distance motor carrying also advanced. Conversely, prices for airline passenger services dropped 7.0 percent. The indexes for business loans (partial) and for chemicals and allied products wholesaling also declined.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: Prices for stage 4 intermediate demand advanced 1.0 percent in July, the largest increase since the index began in December 2009. In July, prices for total services inputs to stage 4 intermediate demand climbed 1.0 percent, and the index for total goods inputs moved up 0.9 percent. (See table D.) Increases in the indexes for portfolio management; diesel fuel; machinery and equipment parts and supplies wholesaling; legal services; hardware, building materials, and supplies retailing; and gross rents for retail properties outweighed falling prices for meats, business loans (partial), and airline passenger services. (See table 6.) For the 12 months ended in July, the index for stage 4 intermediate demand decreased 0.4 percent.

Stage 3 intermediate demand: Prices for stage 3 intermediate demand rose 1.7 percent in July, the largest increase since the index began in December 2009. In July, prices for total goods inputs to stage 3 intermediate demand climbed 3.5 percent, and the index for total services moved up 0.3 percent. Advances in the indexes for raw milk, gasoline, diesel fuel, jet fuel, slaughter chickens, and machinery and equipment parts and supplies wholesaling outweighed falling prices for slaughter cattle, slaughter hogs, and arrangement of freight and cargo transportation. For the 12 months ended in July, the index for stage 3 intermediate demand dropped 5.2 percent.

Stage 2 intermediate demand: Prices for stage 2 intermediate demand were unchanged in July after increasing 1.9 percent in each of the prior two months. In July, a 0.8-percent advance in the index for total services inputs to stage 2 intermediate demand offset a 1.2-percent decrease in prices for total goods inputs. Prices for portfolio management, television advertising time sales, legal services, thermoplastic resins and materials, and diesel fuel increased, while the indexes for crude petroleum, airline passenger services, tax preparation and planning, natural gas, and oilseeds fell. For the 12 months ended in July, prices for stage 2 intermediate demand declined 5.6 percent.

Stage 1 intermediate demand: Prices for stage 1 intermediate demand advanced 1.4 percent in July, after increasing 1.7 percent in June. In July, the index for total goods inputs to stage 1 intermediate demand rose 2.6 percent, and prices for total services inputs inched up 0.1 percent. Increases in the indexes for diesel fuel, industrial chemicals, portfolio management, gasoline, commercial electric power, and corn outweighed falling prices for corrugated recyclable paper, airline passenger services, and carbon steel scrap. For the 12 months ended in July, the index for stage 1 intermediate demand declined 4.5 percent.