November 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) was unchanged in November (in line with expectations). The indexes for energy and food declined in November, offsetting an increase in the index for all items less food and energy. The energy index fell 1.3%, with all of the major component indexes declining except electricity. The food index fell 0.1%, as the index for food at home fell 0.3%, with five of the six major grocery store food group indexes declining.

The index for all items less food and energy rose 0.2% in November, the same increase as in September and October. The indexes for shelter (rent: +0.2%; owners’ equivalent rent: +0.2%), medical care, airline fares, new vehicles, and tobacco were among the indexes that rose in November. In contrast, the indexes for recreation, apparel, household furnishings and operations, and used cars and trucks all declined. 

The all items index rose 0.5% over the last 12 months; this is the largest 12 month increase since the 12-month period ending December 2014. The food index rose 1.3% over the span, while the energy index declined 14.7%. The index for all items less food and energy rose 2.0%, its largest 12-month increase since the 12 months ending May 2014. Rent rose 3.6% YoY, while owners’ equivalent rent rose 3.1%.

The seasonally adjusted producer price index for final demand (PPI) increased 0.3% in November (0.0% expected), partially reversing declines of 0.4% in October and 0.5% in September. The November rise in the final demand index can be traced to prices for final demand services, which advanced 0.5%. In contrast, the index for final demand goods moved down 0.1%.

Final demand services: The index for final demand services advanced 0.5% in November following two consecutive decreases. Nearly 80% of the broad-based increase can be traced to margins for final demand trade services, which climbed 1.2%. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services also moved higher, rising 0.1% and 0.3%, respectively.

Product detail: Over 40% of the November advance in prices for final demand services is attributable to a 6.2% increase in margins for apparel, jewelry, footwear, and accessories retailing. The indexes for machinery and equipment wholesaling, loan services (partial), fuels and lubricants retailing, portfolio management, and long-distance motor carrying also moved higher. Conversely, prices for securities brokerage, dealing, investment advice, and related services fell 3.9%. The indexes for food and alcohol retailing and for water transportation of freight also fell.

Final demand goods: The index for final demand goods inched down 0.1% in November, the fifth consecutive decrease. Over 90% of the November decline can be traced to prices for final demand energy, which fell 0.6%. The index for final demand goods less foods and energy edged down 0.1%. In contrast, prices for final demand foods rose 0.3%.

Product detail: Half of the November decrease in the index for final demand goods is attributable to prices for gasoline, which fell 1.3%. The indexes for residential natural gas, electric power, carbon steel scrap, and corn also moved lower. Conversely, prices for fresh fruits and melons jumped 11.6%. The indexes for eggs for fresh use, jet fuel, and pharmaceutical preparations also increased. 

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