June 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 0.3% in June (+0.3% expected). The all-items increase was broad-based, with advances in the indexes for gasoline, shelter, and food. The energy index rose for the second straight month as the indexes for gasoline, electricity, and natural gas all increased. The food index posted its largest increase since September 2014, partly due to a sharp increase in the eggs index.

The index for all items less food and energy rose 0.2% in June. In addition to the rise in the shelter index, the indexes for recreation, airline fares, personal care, tobacco, and new vehicles were among the indexes that increased in June. These advances more than offset declines in the indexes for medical care, household furnishings and operations, used cars and trucks, and apparel. 

The all items index showed a 12-month increase for the first time since December, rising 0.1% for the 12 months ending June. Despite rising in May and June, the energy index has still declined 15.0% over the past year. However, the indexes for food and for all items less food and energy have both risen 1.8% over the past 12 months.

The seasonally adjusted Producer Price Index for final demand (PPI) advanced 0.4% in June (+0.3% expected). The final demand index moved down 0.7% for the 12 months ended in June, the fifth straight YoY decrease.

Nearly two-thirds of June’s increase in the final demand index can be attributed to prices for final demand goods, which rose 0.7%. The index for final demand services advanced 0.3%.

Final demand goods:  The index for final demand goods moved up 0.7% in June after rising 1.3% a month earlier. Almost 60% of the broad-based advance in June is attributable to prices for final demand energy, which climbed 2.4%. The indexes for final demand goods less foods and energy and for final demand foods increased 0.4% and 0.6%, respectively.

Product detail:  Thirty percent of the June advance in prices for final demand goods can be traced to the gasoline index, which rose 4.3%. Prices for chicken eggs, pharmaceutical preparations, residential electric power, residential natural gas, and cigarettes also moved higher. In contrast, the index for fresh and dry vegetables fell 6.0%. Prices for liquefied petroleum gas and electronic computers also decreased. (See table 4.)

Final demand services:  The index for final demand services moved up 0.3% in June following no change in May. Over half of the broad-based advance can be traced to a 0.2-percent increase in the index for final demand services less trade, transportation, and warehousing. Margins for final demand trade services rose 0.2%, and the index for final demand transportation and warehousing services advanced 0.6%. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail:  Thirty percent of the June increase in the index for final demand services can be attributed to prices for loan services (partial), which climbed 2.4%. The indexes for machinery and equipment wholesaling, fuels and lubricants retailing, truck transportation of freight, deposit services (partial), and portfolio management also moved higher. Conversely, margins for food and alcohol wholesaling declined 3.7%. The indexes for traveler accommodation services and passenger car rental also declined. 

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The price indexes we track were mixed on both month-over-month and year-over-year bases in May. Only Wood Fiber increased year-over-year. 

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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.