August 2020 Producer Price Index

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The Producer Price Index for final demand increased 0.3 percent in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.6 percent in July and fell 0.2 percent in June. (See table A). On an unadjusted basis, the final demand index declined 0.2 percent for the 12 months ended in August.

In August, the rise in prices for final demand was led by a 0.5-percent increase in the index for final demand services. Prices for final demand goods also advanced, inching up 0.1 percent.

The index for final demand less foods, energy, and trade services moved up 0.3 percent in August, the same as in both July and June. For the 12 months ended in August, prices for final demand less foods, energy, and trade services increased 0.3 percent.

Final Demand

Final demand services: The index for final demand services rose 0.5 percent in August, the same as in July. In August, two-thirds of the advance can be traced to a 1.2-percent increase in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) The indexes for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services also moved up, 0.3 percent and 0.2 percent, respectively.

Product detail: Nearly 20 percent of the August advance in prices for final demand services is attributable to a 1.1-percent increase in margins for machinery, equipment, parts, and supplies wholesaling. The indexes for automobiles and automobile parts retailing; truck transportation of freight; food retailing; portfolio management; and securities brokerage, dealing, investment advice, and related services also rose. In contrast, margins for chemicals and allied products wholesaling declined 4.5 percent. The indexes for airline passenger services and investment banking also fell. (See table 4.)

Final demand goods: Prices for final demand goods edged up 0.1 percent in August, the fourth consecutive increase. The August rise can be attributed to a 0.3-percent advance in the index for final demand goods less foods and energy. Conversely, prices for final demand foods fell 0.4 percent, and the index for final demand energy declined 0.1 percent.

Product detail: Among prices for final demand goods in August, the index for plastic resins and materials rose 4.0 percent. Prices for diesel fuel, gas fuels, packaged fluid milk and related products, and nonferrous scrap also moved higher. In contrast, the index for chicken eggs dropped 12.2 percent. Prices for home heating oil, gasoline, and ethanol also decreased.

Intermediate Demand by Commodity Type

Within intermediate demand in August, prices for processed goods rose 0.6 percent, the index for unprocessed goods increased 7.0 percent, and prices for services moved up 0.7 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand rose 0.6 percent in August, the fourth consecutive increase. Sixty percent of the August advance can be traced to prices for processed materials less foods and energy, which moved up 0.5 percent. The index for processed energy goods rose 1.7 percent. Conversely, prices for processed foods and feeds decreased 0.5 percent. For the 12 months ended in August, the index for processed goods for intermediate demand fell 2.6 percent.

Product detail: A major factor in the August increase in prices for processed goods for intermediate demand was the index for lumber, which rose 10.5 percent. Prices for diesel fuel, primary basic organic chemicals, plastic resins and materials, utility natural gas, and softwood veneer and plywood also advanced. In contrast, the index for processed cheese and related products fell 11.0 percent. Prices for heating oil and for cold rolled steel sheet and strip also decreased. (See table 5.)

Unprocessed goods for intermediate demand: Prices for unprocessed goods for intermediate demand rose 7.0 percent in August following a 0.7-percent decrease the previous month. Over half of the broad-based increase can be attributed to an 11.7-percent advance in the index for unprocessed energy materials. Prices for unprocessed foodstuffs and feedstuffs moved up 7.0 percent, and the index for unprocessed nonfood materials less energy rose 1.7 percent. For the 12 months ended in August, prices for unprocessed goods for intermediate demand fell 9.0 percent.

Product detail: Over a quarter of the August increase in the index for unprocessed goods for intermediate demand can be traced to prices for natural gas, which jumped 22.8 percent. The indexes for crude petroleum, raw milk, slaughter steers and heifers, slaughter hogs, and nonferrous scrap also rose. Conversely, prices for corn fell 3.6 percent. The indexes for corrugated recyclable paper and coal also decreased.

Services for intermediate demand: Prices for services for intermediate demand moved up 0.7 percent in August, the third consecutive increase. About three-quarters of the August advance can be attributed to a 0.9-percent rise in the index for services less trade, transportation, and warehousing for intermediate demand. Margins for trade services for intermediate demand increased 1.2 percent. In contrast, prices for transportation and warehousing services for intermediate demand decreased 0.1 percent. For the 12 months ended in August, the index for services for intermediate demand fell 0.6 percent.

Product detail: One-fifth of the August increase in the index for services for intermediate demand can be attributed to prices for securities brokerage, dealing, investment advice, and related services, which rose 5.0 percent. The indexes for portfolio management; hardware, building materials, and supplies retailing; metals, minerals, and ores wholesaling; business loans (partial); and truck transportation of freight also advanced. Conversely, prices for arrangement of freight and cargo transportation dropped 9.6 percent. The indexes for chemicals and allied products wholesaling and for investment banking also declined.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: Prices for stage 4 intermediate demand advanced 0.5 percent in August, the fourth consecutive increase. In August, the index for total services inputs to stage 4 intermediate demand climbed 0.8 percent, and prices for total goods inputs moved up 0.3 percent. (See table D.) Increases in the indexes for portfolio management; hardware, building materials, and supplies retailing; diesel fuel; securities brokerage, dealing, investment advice, and related services; lumber; and metals, minerals, and ores wholesaling outweighed decreases in the indexes for chemicals and allied products wholesaling, investment banking, and processed cheese and related products. (See table 6.) For the 12 months ended in August, prices for stage 4 intermediate demand were unchanged.

Stage 3 intermediate demand: The index for stage 3 intermediate demand rose 1.4 percent in August, the fourth consecutive increase. In August, prices for total goods inputs to stage 3 intermediate demand climbed 2.5 percent, and the index for total services inputs moved up 0.7 percent. Higher prices for raw milk; slaughter steers and heifers; slaughter hogs; primary basic organic chemicals; securities brokerage, dealing, investment advice, and related services; and diesel fuel outweighed decreases in the indexes for arrangement of freight and cargo transportation; chemicals and allied products wholesaling; and heating oil. For the 12 months ended in August, prices for stage 3 intermediate demand moved down 3.8 percent.

Stage 2 intermediate demand: The index for stage 2 intermediate demand moved up 1.8 percent in August following no change in July. In August, prices for total goods inputs to stage 2 intermediate demand advanced 3.9 percent, and the index for total services inputs increased 0.7 percent. Higher prices for gas fuels; crude petroleum; plastic resins and materials; securities brokerage, dealing, investment advice, and related services; portfolio management; and television advertising time sales outweighed declines in the indexes for investment banking, arrangement of freight and cargo transportation, and cold rolled steel sheet and strip. For the 12 months ended in August, prices for stage 2 intermediate demand declined 3.3 percent.

Stage 1 intermediate demand: Prices for stage 1 intermediate demand climbed 1.0 percent in August, the third consecutive increase. In August, the index for total goods inputs to stage 1 intermediate demand rose 1.2 percent, and prices for total services inputs advanced 0.8 percent. Increases in the indexes for diesel fuel; metals, minerals, and ores wholesaling; gas fuels; securities brokerage, dealing, investment advice, and related services; crude petroleum; and business loans (partial) outweighed decreases in the indexes for chemicals and allied products wholesaling, airline passenger services, and corn. For the 12 months ended in August, prices for stage 1 intermediate demand decreased 3.2 percent.