January 2016 Consumer and Producer Price Indices (incl. Forest Products)

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Consumer Price Index

The seasonally adjusted consumer price index for all urban consumers (CPI-U) was unchanged in January (-0.1% expected). An increase in the index for all items less food and energy offset a decline in the energy index to lead to the seasonally adjusted all items index being unchanged. The energy index fell 2.8% as all of its major component indexes declined. The index for all items less food and energy rose 0.3% in January. The increase was broad-based, with most of the major components rising, but increases in the indexes for shelter (rent: +0.3%; owner’s equivalent rent: +0.2%) and medical care (+0.5%) were the largest contributors. 

The all items index rose 1.4% over the last 12 months, compared to the 0.7% YoY increase for the period ending December. The energy index fell 6.5% over the past year -- its smallest 12-month decrease since November 2014. The food index rose 0.8% over the last 12 months, with the food at home index declining 0.5%. The index for all items less food and energy increased 2.2% over the last 12 months, a figure that has been gradually rising over the last several months. Shelter costs (rent: +3.7%; owner’s equivalent rent: +3.2%) contributed to the YoY rise, along with medical costs (+3.3%).

Producer Price Index

The seasonally adjusted producer price index for final demand (PPI) advanced 0.1% in January (-0.2% expected). The MoM increase can be traced to a 0.5% advance in prices for final demand services. In contrast, the index for final demand goods moved down 0.7%. Meanwhile, the index for final demand less foods, energy, and trade services advanced 0.2% for the second consecutive month.

The final demand index declined 0.2% for the 12 months ended in January. Concurrently, however, prices for final demand less foods, energy, and trade services climbed 0.8%.

Final demand services: The index for final demand services advanced 0.5% in January, the third consecutive rise. Leading the broad-based increase in January, margins for final demand trade services moved up 0.9%. (Trade indexes measure changes in margins received by wholesalers and retailers.) The indexes for both final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services rose 0.4%.

Product detail: Nearly half of the January increase in prices for final demand services is attributable to a 4.0-percent advance in margins for machinery and equipment wholesaling. The indexes for services related to securities brokerage and dealing; loan services (partial); apparel, footwear, and accessories retailing; fuels and lubricants retailing; and airline passenger services also moved higher. Conversely, margins for food and alcohol retailing declined 4.1%. The indexes for health, beauty, and optical goods retailing and for physician care also decreased. (See table 4.)

Final demand goods: Prices for final demand goods fell 0.7% in January for the second consecutive month. In January, the decrease in the index for final demand goods can be traced to prices for final demand energy goods, which fell 5.0%. In contrast, the index for final demand foods advanced 1.0%. Prices for final demand goods less foods and energy were unchanged.

Product detail: Over half of the January decrease in prices for final demand goods can be attributed to the gasoline index, which fell 8.8%. Prices for home heating oil, electric power, jet fuel, basic organic chemicals, and corn also moved lower. Conversely, the indexes for fresh and dry vegetables jumped 17.3%. Prices for pharmaceutical preparations and residential natural gas also increased. 

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Month-over-month changes in nearly all of the not-seasonally adjusted price indexes we track were mixed in January, 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.