September 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) decreased 0.2% in September – in line with expectations. The energy index fell 4.7% in September, with all major component indexes declining. The gasoline index continued to fall sharply and was again the main cause of the seasonally adjusted all items decrease. The indexes for fuel oil, electricity, and natural gas declined as well.

In contrast to the energy declines, the indexes for food and for all items less food and energy both accelerated in September. The food index rose 0.4%, its largest increase since May 2014. The index for all items less food and energy rose 0.2% in September. The indexes for shelter (rent: +0.4% MoM; owners’ equivalent rent: +0.3% MoM), medical care, household furnishings and operations, and personal care all increased; the indexes for apparel, used cars and trucks, new vehicles, and airline fares were among those that declined.

The all items index was essentially unchanged for the 12 months ending September after posting a 0.2% increase for the 12 months ending August. The 18.4% decline in the energy index over the past year offset increases in the indexes for food (up 1.6%) and all items less food and energy (up 1.9%). Rent increased 3.7% YoY; owners’ equivalent rent: +3.1% YoY.

The seasonally adjusted producer price index for final demand (PPI) declined 0.5% in September (-0.2% expected). Final demand prices fell 1.1% for the 12 months ended in September, the eighth straight 12-month decline.

In September, two-thirds of the decrease in the final demand index is attributable to prices for final demand goods, which fell 1.2%. The index for final demand services moved down 0.4%.

Final demand goods: The index for final demand goods moved down 1.2% in September, the largest decrease since a 1.9% drop in January. In September, over 80% of the decline can be traced to prices for final demand energy, which fell 5.9%. The index for final demand foods decreased 0.8%. Prices for final demand goods less foods and energy were unchanged.

Product detail: Over two-thirds of the September decline in the final demand goods index is attributable to prices for gasoline, which fell 16.6%. The indexes for beef and veal, diesel fuel, industrial chemicals, chicken eggs, and residual fuel also moved lower. In contrast, motor vehicle prices rose 0.5%. The indexes for fresh and dry vegetables and for pharmaceutical preparations also advanced.

Final demand services: The index for final demand services decreased 0.4% in September, the largest decline since falling 0.5% in February. In September, almost half of the drop can be traced to prices for final demand services less trade, transportation, and warehousing, which decreased 0.3%. The indexes for final demand trade services and for final demand transportation and warehousing services also moved lower, falling 0.4% and 0.7%, respectively. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: Over a quarter of the September decline in the index for final demand services is attributable to prices for securities brokerage, dealing, investment advice, and related services, which dropped 4.3%. The indexes for machinery and equipment wholesaling; loan services (partial); apparel, footwear, and accessories retailing; portfolio management; and airline passenger services also moved lower. Conversely, margins for automotive fuels and lubricants retailing climbed 12.4%. The indexes for deposit services (partial) and water transportation of freight also increased. 

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Almost all of the price indexes we track declined month-over-month in September, and all fell on a year-over-year basis. 

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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.