April 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) increased 0.1% in April (in line with expectations). The “core” index (all-items less food and energy) rose 0.3% in April and led to the slight increase in the seasonally adjusted all-items index. The index for shelter rose, as did the indexes for medical care (+0.7% -- the biggest increase since January 2007), household furnishings and operations, used cars and trucks, and new vehicles. In contrast, the indexes for apparel and airline fares declined in April.

The energy index declined in April, while the food index was unchanged. The indexes for gasoline, natural gas, and fuel oil all declined, while the electricity index was unchanged. The food at home index declined for the second month in a row, offsetting an increase in the index for food away from home. Major grocery store food group indexes were mixed.

The all-items index declined 0.2% for the 12 months ending April. This represented a slightly larger decrease than the 0.1% decline for the 12 months ending March. The decline was driven by the energy index, which fell 19.4% over the last 12 months, with all the major components declining except electricity (+3.8% YoY). The food index rose 2.0% over the last year, and the index for all items less food and energy rose 1.8%.

The seasonally adjusted Producer Price Index for final demand (PPI) fell 0.4% in April (+0.2% expected). This was on the heels of +0.2% in March and -0.5% in February. In April, more than 70% of the decrease in final demand prices can be attributed to a 0.7% decline in the index for final demand goods. Prices for final demand services edged down 0.1%.

Final demand goods: The index for final demand goods moved down 0.7% in April following a 0.3% rise in March. Leading the broad-based decline, prices for final demand energy fell 2.9%. The indexes for final demand foods and for final demand goods less foods and energy decreased 0.9% and 0.1%, respectively.

Product detail:  Over 30% of the April decline in prices for final demand goods can be attributed to the index for gasoline, which decreased 4.7%. Prices for diesel fuel, jet fuel, utility natural gas, pork, and industrial chemicals also moved lower. In contrast, the index for pharmaceutical preparations advanced 0.5%. Prices for fresh and dry vegetables and for raw cotton also moved up.

Final demand services:  The index for final demand services edged down 0.1% in April after inching up 0.1% in March. Leading the decrease, margins for final demand trade services fell 0.8%. (Trade indexes measure changes in margins received by wholesalers and retailers.) The index for final demand transportation and warehousing services declined 0.1%. Conversely, prices for final demand services less trade, transportation, and warehousing rose 0.2%. 

Product detail:  Over 40% of the April decrease in the index for final demand services can be traced to margins for machinery and equipment wholesaling, which declined 1.0%. The indexes for automotive fuels and lubricants retailing; health, beauty, and optical goods retailing; portfolio management; and food and alcohol retailing also moved lower. In contrast, prices for securities brokerage, dealing, investment advice, and related services climbed 4.0%. The indexes for food wholesaling, inpatient care, and passenger car rental also advanced. 

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The price indexes we track were mixed on both month-over-month and year-over-year bases in March. Only Lumber & Wood Products did not decrease from March to April. 

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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.