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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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Friday, July 15, 2016

June 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) increased 0.2% in June (+0.3% expected). Over the last 12 months, the all items index rose 1.0% before seasonal adjustment.
For the second consecutive month, increases in the indexes for energy and all items less food and energy more than offset a decline in the food index to result in the seasonally adjusted all-items increase. The food index fell 0.1%, with the food at home index declining 0.3%. The energy index rose 1.3%, due mainly to a 3.3% increase in the gasoline index; the indexes for natural gas and electricity declined. 
The index for all items less food and energy increased 0.2% in June. The shelter index rose 0.3%, and a broad array of indexes also increased, including medical care (+0.2%), education, airline fares, motor vehicle insurance, and recreation. In contrast, the indexes for used cars and trucks, apparel, communication, and household furnishings and operations all declined in June.  
The all-items index rose 1.0% for the 12 months ending June. This is the same increase as for the 12 months ending May, but smaller than the 1.7% average annual increase over the past 10 years. The index for all items less food and energy rose 2.3% for the 12 months ending June, a larger increase than the 2.2% rise for the 12 months ending May, and above the average annual rate of 1.9% over the past 10 years. Rents rose by 3.8% YoY for a second consecutive month, the fastest pace since 2008; the medical care services index was also up 3.8% YoY.
The seasonally adjusted producer price index for final demand (PPI) increased 0.5% in June (+0.3% expected). Final demand prices rose 0.4% in May and 0.2% in April. On an unadjusted basis, the final demand index advanced 0.3% for the 12 months ended in June, the largest 12-month increase since moving up 0.9% in December 2014.
In June, the advance in the final demand index was led by prices for final demand services, which rose 0.4%. The index for final demand goods advanced 0.8%.
Prices for final demand less foods, energy, and trade services rose 0.3% in June after declining 0.1% in May. For the 12 months ended in June, the index for final demand less foods, energy, and trade services increased 0.9%.
Final Demand
Final demand services: The index for final demand services advanced 0.4% in June, the third consecutive rise. The broad-based June increase was led by prices for final demand services less trade, transportation, and warehousing, which also moved up 0.4%. The indexes for final demand trade services and for final demand transportation and warehousing services rose 0.7% and 0.5%, respectively. (Trade indexes measure changes in margins received by wholesalers and retailers.)
Product detail: A major factor in the increase in prices for final demand services was the index for services related to securities brokerage and dealing, which rose 7.7%. The indexes for automotive fuels and lubricants retailing; machinery, equipment, parts, and supplies wholesaling; traveler accommodation services; airline passenger services; and health, beauty, and optical goods retailing also increased. In contrast, margins for apparel, footwear, and accessories retailing declined 2.6%. The indexes for long-distance motor carrying and residential real estate loans (partial) also fell.
Final demand goods: The index for final demand goods advanced 0.8% in June, the largest rise since a 1.2% jump in May 2015. Over three-quarters of the June increase can be traced to prices for final demand energy, which climbed 4.1%. The index for final demand foods moved up 0.9%. Prices for final demand goods less foods and energy were unchanged.
Product detail: Nearly half of the increase in the index for final demand goods is attributable to gasoline prices, which climbed 9.9%. Prices for meats, jet fuel, electric power, home heating oil, and cigarettes also moved higher. Conversely, the index for chicken eggs dropped 29.9%. Prices for carbon steel scrap and residential natural gas also decreased. 
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Wood Fiber was the only not-seasonally adjusted price index we track that fell on a MoM basis; YoY comparisons were mixed. 
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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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