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Macro Pulse highlights recent activity and events expected to affect the U.S. economy over the next 24 months. While the review is of the entire U.S. economy its particular focus is on developments affecting the Forest Products industry. Everyone with a stake in any level of the sector can benefit from
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Wednesday, March 16, 2016

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

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The seasonally adjusted consumer price index for all urban consumers (CPI-U) declined 0.2% in February (-0.3% expected). The energy index continued to decrease and was the major cause of the seasonally adjusted decline in the all items index, more than offsetting increases in the indexes for food (+0.2%) and for all items less food and energy. The gasoline index fell sharply, declining 13.0%, and the indexes for fuel oil and electricity also decreased, though the index for natural gas rose.
The index for all items less food and energy rose 0.3%. Increases in the indexes for shelter (rent: +0.3%; owner’s equivalent rent: +0.3%), apparel, and medical care (+0.5%) were the largest contributors to the rise, but almost all major components increased in February.
The all items index rose 1.0% over the last 12 months. The energy index fell 12.5% over the past year, with all of its major components declining. The food index advanced 0.9%, with the index for food at home declining but the food away from home index rising. The index for all items less food and energy rose 2.3%, its largest 12-month increase since May 2012. Shelter costs (rent: +3.7%; owner’s equivalent rent: +3.2%) contributed to the YoY rise, along with medical costs (+3.9%). 
The seasonally adjusted producer price index for final demand (PPI) fell 0.2% in February (in line with expectations), thanks primarily to a 0.6% decline in final demand goods. The index for final demand services was unchanged. The index for final demand less foods, energy, and trade services inched up 0.1% in February after increasing 0.2% in both January and December.
For the 12 months ended in February, prices for final demand less foods, energy, and trade services rose 0.9%, the largest 12-month advance since a 0.9% increase in July 2015. 
Final demand goods: The index for final demand goods fell 0.6% in February, the third consecutive decline. Most of the February decrease can be traced to prices for final demand energy, which dropped 3.4%. The index for final demand foods moved down 0.3%. In contrast, prices for final demand goods less foods and energy advanced 0.1%.
Product detail: Leading the February decline in prices for final demand goods, the gasoline index fell 15.1%. Prices for fresh and dry vegetables, diesel fuel, beef and veal, passenger cars, and industrial chemicals also moved lower. Conversely, the index for pharmaceutical preparations climbed 1.2%. Prices for home heating oil and eggs for fresh use also increased.
Final demand services: The index for final demand services was unchanged in February following three consecutive advances. In February, a 0.3-percent rise in prices for final demand services less trade, transportation, and warehousing offset a 0.4-percent decrease in the index for final demand trade services and a 0.7-percent drop in prices for final demand transportation and warehousing services. (Trade indexes measure changes in margins received by wholesalers and retailers.)
Product detail: Among final demand services in February, prices for securities brokerage, dealing, investment advice, and related services moved up 4.8%. The indexes for machinery, equipment, parts, and supplies wholesaling; food retailing; guestroom rental; and outpatient care (partial) also increased. In contrast, the index for apparel, footwear, and accessories retailing declined 6.0%. The indexes for fuels and lubricants retailing, portfolio management, truck transportation of freight, and deposit services (partial) also fell. 
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Month-over-month changes in most of the not-seasonally adjusted price indexes we track were negative in February, 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.

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