Producer Price Index for Finished Goods increased 0.4% in September

The Producer Price Index for Finished Goods increased 0.4 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported on October 14. This advance followed a 0.4-percent rise in August and a 0.2-percent increase in July. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.5 percent in September and the crude goods index fell 0.5 percent. On an unadjusted basis, prices for finished goods advanced 4.0 percent for the 12 months ended September 2010, their eleventh straight year-over-year rise.

Stage-of-Processing Analysis

Finished goods
In September, the broad-based increase in the index for finished goods can be traced primarily to higher prices for finished consumer foods, which rose 1.2 percent. The indexes for both finished energy goods and for finished goods less foods and energy also contributed to this increase, moving up 0.5 percent and 0.1 percent, respectively.

Finished foods: In September, prices for finished consumer foods advanced 1.2 percent after declining 0.3 percent in the previous month. Accounting for almost two-thirds of the monthly increase, prices for meats moved up 5.2 percent. Higher prices for fresh and dry vegetables and for processed young chickens also contributed to the rise in the finished consumer foods index.

Finished energy: Prices for finished energy goods advanced 0.5 percent in September, their second straight increase. A major factor in the September rise was the index for liquefied petroleum gas, which moved up 6.1 percent. Higher prices for residential electric power also contributed to the advance in the finished energy goods index.

Finished core: The index for finished goods less foods and energy inched up 0.1 percent in September, its eleventh consecutive increase. A 0.6-percent advance in prices for light motor trucks was the main factor in the September rise in the finished core index.

Intermediate goods
The Producer Price Index for Intermediate Materials, Supplies and Components increased 0.5 percent in September following a 0.3-percent advance in August. The September rise for the intermediate goods index was broad-based, with prices for foods and feeds climbing 2.1 percent. The index for intermediate goods less foods and energy moved up 0.2 percent and prices for energy goods advanced 0.7 percent. On a 12-month basis, the intermediate goods index increased 5.6 percent for September, its tenth consecutive year-over-year rise.

Intermediate foods: The index for intermediate foods and feeds advanced 2.1 percent in September after moving up 0.9 percent in August. A major contributor to the September increase was prices for formula feeds, which moved up 4.4 percent. Higher prices for meats and processed young chickens also were factors in the rise in the intermediate foods and feeds index.

Intermediate core: Prices for intermediate goods other than foods and energy increased 0.2 percent in September after inching up 0.1 percent in August. Accounting for 40 percent of the September advance, the index for industrial chemicals rose 1.5 percent. Higher prices for paperboard also contributed to the increase in the intermediate core index.

Intermediate energy: The index for intermediate energy goods climbed 0.7 percent in September following a 1.3-percent rise in August. A major factor in the September advance was a 2.6-percent increase in jet fuel prices. Higher prices for liquefied petroleum gas also contributed to the rise in the intermediate energy goods index.

Crude goods
The Producer Price Index for Crude Materials for Further Processing declined 0.5 percent in September. For the three months ending in September, crude material prices rose 4.6 percent subsequent to moving down 5.8 percent from March to June. In September, the monthly decrease was due to the index for crude energy materials, which fell 8.8 percent. By contrast, prices for crude foodstuffs and feedstuffs advanced 5.0 percent and the index for crude non-food materials less energy increased 5.5 percent.

Crude energy: The index for crude energy materials fell 8.8 percent in September. From June to September, prices for crude energy materials moved down 4.2 percent following an 8.2-percent decline in the previous three-month period. Almost ninety percent of the September decrease can be attributed to a 19.7-percent drop in the index for natural gas. Lower prices for crude petroleum also contributed to the September decline in the crude energy index.

Crude foods: The index for crude foodstuffs and feedstuffs moved up 5.0 percent in September. From June to September, prices for crude foodstuffs and feedstuffs advanced 12.2 percent after declining 4.7 percent in the prior three-month period. Accounting for about half of the September increase, the index for corn surged 26.1 percent. Higher prices for slaughter steers and heifers also were a significant factor in the advance in the crude foods index.

Crude core: The index for crude non-food materials less energy moved up 5.5 percent in September. For the three-month period ending in September, crude core prices rose 8.2 percent after falling 3.2 percent from March to June. Almost a third of the September increase can be attributed to a 10.1-percent gain in the index for nonferrous metal ores. Higher prices for corn also contributed to the September advance in the crude core index.

Services Analysis
Trade Industries: The Producer Price Index for the Net Output of Total Trade Industries advanced 0.7 percent in September, its third straight monthly increase. (Trade indexes measure changes in margins received by wholesalers and retailers.) About ninety percent of the September rise can be traced to a 3.3-percent advance in the margin index for merchant wholesalers of non-durable goods. Higher margins received by merchant wholesalers of durable goods and supermarkets also contributed to the increase in the total trade industries index.

Transportation and warehousing industries: The Producer Price Index for the Net Output of Transportation and Warehousing Industries moved down 1.4 percent in September, its second consecutive monthly decline. Accounting for about 85 percent of the September decrease, prices received by the scheduled passenger air transportation industry fell 8.0 percent. Lower prices received by the Coastal and Great Lakes freight transportation industry and by the non-scheduled air freight chartering industry also were factors in the decline in the transportation and warehousing industries index.

Traditional service industries: The Producer Price Index for the Net Output of Total Traditional Service Industries inched up 0.1 percent in September, its third straight monthly advance. Leading the September increase, prices received by the industry for investment banking and securities dealing moved up 6.7 percent. Higher prices received by insurance carriers and newspaper publishers also contributed to the rise in the total traditional service industries index.