What is Macro Pulse?

Macro Pulse highlights recent activity and events expected to affect the U.S. economy over the next 24 months. While the review is of the entire U.S. economy its particular focus is on developments affecting the Forest Products industry. Everyone with a stake in any level of the sector can benefit from
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Friday, April 23, 2010

March 2010 Consumer and Producer Price Indices: Bottle Rockets and Duds

On a seasonally adjusted basis, the consumer price index for all urban consumers (CPI-U) increased 0.1 percent in March. The CPI-U has jumped 2.3 percent over the past 12 months. The producer price index for finished goods (PPI) was somewhat “livelier” in March, rising 0.7 percent; that brought the year-over-year change to 6.0 percent – the largest annual gain since an 8.8 percent rise in September 2008. The Bureau of Labor Statistics attributed over 70 percent of the increase in the finished goods index to a 2.4 percent jump in prices for consumer foods.

Producer price indices of some relevance to forest products manufacturers have moved higher in recent months; various hypotheses (e.g., capacity curtailments coupled with higher capacity utilization, rainy/snowy winter weather that restricted harvest activity, and greater export demand) have been advanced for the price rises.

The scaling in the six-chart figure above gives the impression that year-over-year percentage changes in the PPIs of all processing stages or commodity groups are “rocketing to the moon.” That isn’t necessarily the case, as shown by the figure at left and table below. While prices of softwood logs, bolts and timber are presently on a year-over-year “moon shot” at 32.3 percent (although we expect softwood logs to follow pulpwood’s lead and lose momentum as weather and ground conditions dry out), prices faced by the pulp, paper and allied products sector are a comparatively tame 2.7 percent. It’s quite interesting to see how PPI trajectories are diverging after having been quite tightly grouped six months ago.

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