October 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 0.2% in October -- in line with expectations. The indexes for food, energy, and all items less food and energy all increased modestly in October. The food index, which increased 0.4% in September, rose 0.1% in October, with four of the six major grocery store food group indexes rising. The energy index, which declined in August and September, advanced 0.3% in October; major energy component indexes were mixed.

The index for all items less food and energy rose 0.2% in October, the same increase as in September. Advances in the indexes for shelter (rent: +0.3%; owners’ equivalent rent: +0.2%) and medical care (+0.8%) were the largest contributors to the increase. In contrast, the indexes for apparel, new vehicles, household furnishings and operations, and used cars and trucks all declined.

The all-items index rose 0.2% over the last 12 months. The 12-month change has been between negative 0.2% and positive 0.2% since January. The food index has increased 1.6% over the past year, and the index for all items less food and energy has risen 1.9%. The rise in housing costs has also been significant (rent: +3.7%; owners’ equivalent rent: +3.1%). These advances have been mostly offset by a 17.1% decline in the energy index.

The seasonally adjusted producer price index for final demand (PPI) decreased 0.4% (-0.2% expected) in October. Final demand prices moved down 0.5% in September and were unchanged in August. Roughly 70% of the October decrease in the final demand index can be traced to prices for final demand services, which moved down 0.3%. The index for final demand goods declined 0.4%.

Final demand services: The index for final demand services moved down 0.3% in October following a 0.4-percent decline in the prior month. Over 70% of the decrease in October can be traced to margins for final demand trade services, which dropped 0.7%. (Trade indexes measure changes in margins received by wholesalers and retailers.) The index for final demand services less trade, transportation, and warehousing edged down 0.1%. In contrast, prices for final demand transportation and warehousing services inched up 0.1%.

Product detail: Over half of the October decline in the index for final demand services is attributable to margins for fuels and lubricants retailing, which fell 15.8%. The indexes for apparel, jewelry, footwear, and accessories retailing; loan services (partial); portfolio management; wireless telecommunication services; and health, beauty, and optical goods retailing also declined. Conversely, prices for truck transportation of freight advanced 0.3%. The indexes for food retailing and deposit services (partial) also increased.

Final demand goods: The index for final demand goods moved down 0.4% in October, the fourth consecutive decrease. Leading the decline in October, the index for final demand goods less foods and energy fell 0.3%. Prices for final demand foods decreased 0.8%. The index for final demand energy was unchanged.

Product detail: Over one-third of the October decline in the final demand goods index is attributable to prices for light motor trucks, which fell 1.8%. The indexes for chicken eggs, iron and steel scrap, beef and veal, boxed meat, and electric power also moved lower. In contrast, gasoline prices rose 3.8%. The indexes for pharmaceutical preparations and corn also advanced. 

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Month-over-month changes in the not-seasonally adjusted price indexes we track were mixed in October, but 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.