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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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Thursday, February 26, 2015

January 2015 Consumer and Producer Price Indices (incl. Forest Products)

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The seasonally adjusted Consumer Price Index for All Urban Consumers (CPI-U) declined 0.7% in January (about in line with expectations of -0.6%). The energy index fell 9.7% as the gasoline index fell 18.7% in January, the sharpest in a series of seven consecutive declines. The gasoline decrease was overwhelmingly the cause of the decline in the all items index, which would have risen 0.1% had the gasoline index been unchanged. The fuel oil index also fell sharply, and the index for natural gas turned down, although the electricity index rose. The food index was unchanged in January, with the food at home index falling for the first time since May 2013.
The index for all items less food and energy rose 0.2% in January. The shelter index rose 0.3%, and the indexes for personal care, for apparel, and for recreation increased as well. The medical care index was unchanged, while an array of indexes declined in January, including those for household furnishings and operations, alcoholic beverages, new vehicles, used cars and trucks, airline fares, and tobacco. 
The all items index declined 0.1% over the last 12 months, the first negative 12-month change since the period ending October 2009. The energy index fell 19.6% over the span, with the gasoline index down 35.4%. The food index rose 3.2% (thanks, in part, to ground beef increasing by 21%), and the index for all items less food and energy increased 1.6%.  
The seasonally adjusted Producer Price Index for final demand (PPI) decreased 0.8% in January (versus expectations of -0.5%). Final demand prices moved down 0.2% in both December and November. In January, the 0.8% decline in final demand prices can be traced primarily to a 2.1% decrease in the index for final demand goods. Prices for final demand services fell 0.2%.
Final demand goods:  The index for final demand goods moved down 2.1% in January, the seventh consecutive decrease. Prices for final demand energy fell 10.3% -- led by the index for gasoline, which dropped 24.0%. Prices for diesel fuel, jet fuel, basic organic chemicals, dairy products, and home heating oil also moved lower. Conversely, the index for residential electric power moved up 1.2%. The indexes for final demand foods and for final demand goods less foods and energy moved down 1.1% and 0.2%, respectively.
Final demand services:  The index for final demand services decreased 0.2% in January, the first decline since falling 0.3% in September 2014. In January, prices for final demand services less trade, transportation, and warehousing moved down 0.4%, and the index for final demand transportation and warehousing services dropped 0.8%. In contrast, margins for final demand trade services advanced 0.5%. (Trade indexes measure changes in margins received by wholesalers and retailers.) 
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The price indexes we track were mixed on both month-over-month and year-over-year bases in January. The Wood Fiber index hit a new all-time high, however. 
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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

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