October 2020 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 advanced 0.3 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.4 percent in September and 0.3 percent in August. (See table A.) On an unadjusted basis, the final demand index increased 0.5 percent for the 12 months ended in October, the largest advance since moving up 1.1 percent for the 12 months ended in February.

In October, nearly 60 percent of the rise in the final demand index can be traced to a 0.5-percent increase in prices for final demand goods. The index for final demand services moved up 0.2 percent.

The index for final demand less foods, energy, and trade services advanced 0.2 percent in October, the sixth consecutive increase. For the 12 months ended in October, prices for final demand less foods, energy, and trade services rose 0.8 percent, the largest advance since moving up 1.0 percent for the 12 months ended in March.

Final Demand

Final demand goods: The index for final demand goods increased 0.5 percent in October, the sixth consecutive rise. Nearly three-fourths of the October advance is attributable to prices for final demand foods, which jumped 2.4 percent. The index for final demand energy moved up 0.8 percent. Prices for final demand goods less foods and energy were unchanged.

Product detail: In October, a major factor in the increase in prices for final demand goods was the index for fresh and dry vegetables, which rose 26.8 percent. Prices for gasoline, meats, chicken eggs, and thermoplastic resins and materials also moved higher. In contrast, the residential electric power index fell 1.0 percent. Prices for light motor trucks, packaged fluid milk and related products, and passenger cars also decreased. (In accordance with usual practice, most new-model-year passenger cars and light motor trucks were introduced into the PPI in October. See Report on Quality Changes for 2021 Model Vehicles at www.bls.gov/web/ppi/ppimotveh.htm.)

Final demand services: The index for final demand services rose 0.2 percent in October after advancing 0.4 percent in September. Nearly 40 percent of the broad-based October increase can be traced to prices for final demand transportation and warehousing services, which moved up 1.1 percent. The indexes for final demand trade services and final demand services less trade, transportation, and warehousing also advanced, 0.2 percent and 0.1 percent, respectively. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: Over a quarter of the advance in the index for final demand services can be traced to prices for long-distance motor carrying, which rose 1.9 percent. The indexes for hardware, building materials, and supplies retailing; securities brokerage, dealing, and investment advice; automotive fuels and lubricants retailing; hospital inpatient care; and automobile retailing (partial) also moved higher. Conversely, margins for chemicals and allied products wholesaling fell 2.6 percent. The indexes for gaming receipts (partial) and physician care also decreased. (See table 4.)

Intermediate Demand by Commodity Type

Within intermediate demand in October, prices for processed goods advanced 0.3 percent, the index for unprocessed goods rose 2.6 percent, and prices for services increased 0.8 percent. (See tables B and C.)

Processed goods for intermediate demand: The index for processed goods for intermediate demand rose 0.3 percent in October, the fifth consecutive advance. Seventy percent of the October increase is attributable to prices for processed foods and feeds, which climbed 2.2 percent. The index for processed materials less foods and energy moved up 0.2 percent. In contrast, prices for processed energy goods declined 0.3 percent. For the 12 months ended in October, the index for processed goods for intermediate demand fell 1.5 percent.

Product detail: A 3.4-percent advance in the index for prepared animal feeds was a major factor in the October rise in prices for processed goods for intermediate demand. The indexes for gasoline, diesel fuel, meats, thermoplastic resins and materials, and lubricating oil base stocks also moved higher. Conversely, prices for natural gas to electric utilities decreased 10.6 percent. The indexes for electric power and softwood lumber (not edge worked) also fell. (See table 5.)

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand advanced 2.6 percent in October, the third straight increase. Over half of the broad-based rise in October can be traced to prices for unprocessed energy materials, which moved up 4.5 percent. The indexes for unprocessed foodstuffs and feedstuffs and for unprocessed nonfood materials less energy also increased, 2.3 percent and 0.6 percent, respectively. For the 12 months ended in October, prices for unprocessed goods for intermediate demand declined 3.4 percent.

Product detail: Over 70 percent of the October rise in the index for unprocessed goods for intermediate demand is attributable to prices for crude petroleum, which jumped 13.8 percent. The indexes for slaughter hogs; slaughter steers and heifers; slaughter poultry; corn; and hay, hayseeds, and oilseeds also moved higher. In contrast, raw milk prices fell 18.4 percent. The indexes for natural gas and corrugated recyclable paper also decreased.

Services for intermediate demand: The index for services for intermediate demand climbed 0.8 percent in October, the fifth consecutive increase. Nearly half of the broad-based October advance is attributable to a 0.5-percent rise in prices for services less trade, transportation, and warehousing for intermediate demand. The indexes for trade services for intermediate demand and for transportation and warehousing services for intermediate demand moved up 1.1 percent and 1.6 percent, respectively. For the 12 months ended in October, prices for services for intermediate demand advanced 1.6 percent, the largest increase since rising 1.7 percent for the 12 months ended in January.

Product Detail: A major factor in the October increase in the index for services for intermediate demand was a 15.0-percent jump in prices for broadcast and network television advertising time sales. The indexes for hardware, building materials, and supplies retailing; metals, minerals, and ores wholesaling; arrangement of freight and cargo transportation; securities brokerage, dealing, and investment advice; and temporary help services also advanced. Conversely, prices for gross rents of retail properties fell 8.8 percent. The indexes for chemicals and allied products wholesaling and for legal services also declined.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: In October, the index for stage 4 intermediate demand advanced 0.4 percent, the sixth consecutive increase. In October, prices for both total goods and total services inputs to stage 4 intermediate demand also moved up 0.4 percent. (See table D.) Advances in the indexes for natural cheese (except cottage cheese); hardware, building materials, and supplies retailing; metals, minerals, and ores wholesaling; securities brokerage, dealing, and investment advice; machinery and equipment parts and supplies wholesaling; and meats outweighed declines in the indexes for gross rents of retail properties, chemicals and allied products wholesaling, and electric power. (See table 6.) For the 12 months ended in October, prices for stage 4 intermediate demand climbed 1.6 percent, the largest increase since rising 1.6 percent for the 12 months ended in January.

Stage 3 intermediate demand: Prices for stage 3 intermediate demand rose 0.4 percent in October after increasing 1.1 percent in the prior month. In October, the index for total services inputs to stage 3 intermediate demand climbed 0.7 percent, and prices for total goods inputs moved up 0.2 percent. Advances in the indexes for arrangement of freight and cargo transportation; slaughter hogs; gasoline; slaughter poultry; slaughter steers and heifers; and metals, minerals, and ores wholesaling outweighed decreasing prices for raw milk, gross rents of retail properties, and jet fuel. For the 12 months ended in October, the index for stage 3 intermediate demand fell 2.5 percent.

Stage 2 intermediate demand: Prices for stage 2 intermediate demand rose 1.3 percent in October, the sixth consecutive increase. In October, the index for total goods inputs to stage 2 intermediate demand advanced 2.0 percent, and prices for total services inputs moved up 0.8 percent. Increases in the indexes for crude petroleum; arrangement of freight and cargo transportation; thermoplastic resins and materials; temporary help services; securities brokerage, dealing, and investment advice; and hardware, building materials, and supplies retailing outweighed falling prices for natural gas, softwood lumber (not edge worked), and legal services. For the 12 months ended in October, the index for stage 2 intermediate demand declined 0.9 percent.

Stage 1 intermediate demand: Prices for stage 1 intermediate demand advanced 0.5 percent in October after increasing 1.8 percent in September. In October, prices for both total goods and total services inputs to stage 1 intermediate demand also rose 0.5 percent. Advances in the indexes for diesel fuel; metals, minerals, and ores wholesaling; crude petroleum; hardware, building materials, and supplies retailing; corn; and securities brokerage, dealing, and investment advice outweighed declines in the indexes for gross rents of retail properties, chemicals and allied products wholesaling, and electric power. For the 12 months ended in October, prices for stage 1 intermediate demand fell 0.6 percent.

Coronavirus (COVID-19) Pandemic Impact on October 2020 Producer Price Index Survey Data

As was the case for March through September, the Producer Price Index (PPI) response rates for October were consistent with pre-COVID-19 response rates, and no changes in estimation procedures were necessary. Additional information is available at www.bls.gov/covid19/effects- of-covid-19-pandemic-on-producer-price-index.htm.

Resampling of Industries

Effective with the release of data for October 2020, the Producer Price Index (PPI) includes data for 12 resampled industries classified according to the 2017 North American Industry Classification System (NAICS). The Bureau of Labor Statistics periodically updates the sample of producers providing data for the PPI to reflect current conditions more accurately when the structure, membership, technology, or product mix of an industry shifts. The first results of this systematic process were published in July 1986. Subsequent efforts have been completed at regular intervals.

For information on index additions, deletions, and recodes effective October 2020, see the current issue of the PPI Detailed Report online at www.bls.gov/ppi/ppidr202010.pdf, or contact the PPI Section of Index Analysis and Public Information at ppi-info@bls.gov or (202) 691- 7705.

NAICS Code Industry 212230 Copper, nickel, lead, and zinc mining 311412 Frozen specialty food manufacturing 332996 Fabricated pipe and pipe fitting manufacturing 333132 Oil and gas field machinery and equipment manufacturing 333243 Sawmill, woodworking, and paper machinery manufacturing 333994 Industrial process furnace and oven manufacturing 334418 Printed circuit assembly manufacturing 334419 Other electronic component manufacturing 334513 Industrial process variable instruments manufacturing 336612 Boat building 483111 Deep sea freight transportation 511199 All other publishers

Recalculated Seasonal Adjustment Factors and Relative Importance Figures to be Available on February 12, 2021

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 12, 2021 (2 workdays prior to the release of PPI data for January 2021 on February 17, 2021):

* Direct seasonal factors for PPI commodity indexes for the year 2021, * Recalculated seasonal factors for the last 5 years (2016-2020) for PPI commodity indexes, * Recalculated seasonal factors for the last 5 years (2016-2020) for PPI Final Demand- Intermediate Demand indexes, * Recalculated seasonal index data for the last 5 years (2016-2020) 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 2020, will be available on February 12, 2021:

* 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 Updates Commodity Weight Allocations for the Final Demand-Intermediate Demand Aggregation Structure

Effective with the release of data for January 2021 on February 17, 2021, the Bureau of Labor Statistics will update the weight allocations used to calculate the Producer Price Index (PPI) Final Demand-Intermediate Demand (FD-ID) indexes to more accurately reflect recent sales patterns. While PPI commodity index weights will continue to be based on shipment values from the 2012 economic census, the proportions of these weights allocated to the various FD-ID categories will change. The new allocations will be based primarily on data from the 2012 Input- Output Accounts produced by the Bureau of Economic Analysis.

It is important to note that the allocation update will not change the PPI commodity classification system, reference base, the FD-ID aggregation structure, or historical index data. It may, however, result in substantial shifts in the relative importance figures of certain commodity components that make up the FD-ID indexes.

Relative importance figure tables for December 2020, which reflect the shift from 2007 to 2012 input-output relationships, will be available on February 12, 2021 on the BLS website at www.bls.gov/ppi. This information also may be requested from the PPI Section of Index Analysis and Public Information through e-mail to ppi-info@bls.gov or by calling (202) 691- 7705. For more information about this update, contact Jonathan Weinhagen at weinhagen.jonathan@bls.gov or (202) 691-7709.

Recent articles about the PPI

* Measuring the substitution effect in Producer Price Index goods data 2002-16: www.bls.gov/opub/mlr/2020/article/measuring-the-substitution-effect-in-ppi-data.htm.

* The impact of the COVID-19 pandemic on food price indexes and data collection: www.bls.gov/opub/mlr/2020/article/the-impact-of-the-covid-19-pandemic-on-food-price- indexes-and-data-collection.htm.

* A new BLS satellite series of net inputs to industry price indexes: methodology and uses: www.bls.gov/opub/mlr/2020/article/a-new-bls-satellite-series-of-net-inputs-to-industry-price- indexes.htm.

* From the barrel to the pump: the impact of the COVID-19 pandemic on prices for petroleum products: www.bls.gov/opub/mlr/2020/article/from-the-barrel-to-the-pump.htm.

* The effects of tariff rates on the U.S. economy: what the Producer Price Index tells us: www.bls.gov/opub/btn/volume-9/the-effects-of-tarifff-rates-on-the-u-s-economy-what-the- producer-price-index-tells-us.htm.

* International cotton trade and causes of price volatility in the United States: www.bls.gov/opub/btn/volume-9/international-cotton-trade-and-causes-of-price-volatility-in- the-united-states.htm.