June 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 0.2% 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.

Producer Price Index

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.