March 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) increased 0.1% in March (+0.2% expected). Over the last 12 months, the all items index rose 0.9% before seasonal adjustment.

The food index declined in March, while the indexes for energy and for all items less food and energy rose, leading to the slight seasonally adjusted increase in the all items index. The food index fell 0.2% after rising in February, as five of the six major grocery store food groups declined. The energy index rose for the first time since November, with all of its major components except natural gas increasing. 

While the index for all items less food and energy increased in March, the 0.1% advance was the smallest increase since August. Major component indexes were mixed in March. The indexes for shelter (rent: +0.3%; owners’ equivalent rent: +0.2%), recreation, medical care (+0.1%), education, tobacco, and personal care were among those that rose, while the indexes for apparel, airline fares, communication, household furnishings and operations, and used cars and trucks all declined. 

The all items index rose 0.9% over the last 12 months, a slightly smaller increase than the 1.0% change for the 12 months ending February. The index for all items less food and energy has risen 2.2% over the last 12 months, and the food index has increased 0.8%. Despite rising in March, the energy index has declined 12.6% over the last year. Rents rose by 3.7%; owners’ equivalent rent: +3.1%; medical care: +3.6%)

Producer Price Index

The seasonally adjusted producer price index for final demand (PPI) fell 0.1% in March (+0.3% expected). Final demand prices decreased 0.2% in February and advanced 0.1% in January. On an unadjusted basis, the final demand index moved down 0.1% for the 12 months ended in March. (See table A.)

The decrease in the final demand index in March can be traced to prices for final demand services, which declined 0.2%. In contrast, prices for final demand goods rose 0.2%.

The index for final demand less foods, energy, and trade services was unchanged in March after four consecutive advances. For the 12 months ended in March, prices for final demand less foods, energy, and trade services rose 0.9%. 

Final demand services: The index for final demand services fell 0.2% in March, the first decline since October 2015. In March, a 0.5-percent decrease in margins for final demand trade services accounted for over 80% of the broad-based decline in prices for final demand services. (Trade indexes measure changes in margins received by wholesalers and retailers.) The indexes for final demand transportation and warehousing services and for final demand services less trade, transportation, and warehousing fell 0.3% and 0.1%, respectively.

Product detail: Three-quarters of the March decrease in prices for final demand services can be attributed to margins for machinery, equipment, parts, and supplies wholesaling, which moved down 1.9%. The indexes for chemicals and allied products wholesaling, consumer loans (partial), physician care, fuels and lubricants retailing, and truck transportation of freight also decreased. Conversely, margins for food and alcohol retailing increased 2.3%. Prices for traveler accommodation services and airline passenger services also rose. (See table 4.)

Final demand goods: The index for final demand goods moved up 0.2% in March following eight straight declines. Most of the increase can be traced to prices for final demand energy, which rose 1.8%. The index for final demand goods less foods and energy inched up 0.1%. In contrast, prices for final demand foods declined 0.9%.

Product detail: Leading the March rise in prices for final demand goods, the gasoline index jumped 7.1%. Prices for carbonated soft drinks in bottles and cans, home heating oil, jet fuel, iron and steel scrap, and pharmaceutical preparations also moved higher. Conversely, the index for fresh and dry vegetables dropped 12.0%. Prices for electric power and motor vehicles also decreased. 

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