July 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 July (0.0% expected) after rising in each of the four previous months. After rising in each of the last four months, the energy index fell 1.6% due to a sharp decrease in the gasoline index (-5.5%); other energy indexes were mixed. The index for all items less food and energy rose, but posted its smallest increase since March.

The all items index rose 0.8% for the 12 months ending July, a smaller increase than the 1.0% rise for the 12 months ending June. Similarly, the index for all items less food and energy rose 2.2% for the 12 months ending July, a smaller increase than the 2.3% rise for the 12 months ending June. Rents rose by 3.8% YoY for a third consecutive month, the fastest pace since 2008; medical care services: +4.1% YoY.

Producer Price Index

The seasonally adjusted producer price index for final demand (PPI) decreased 0.4% in July (+0.1% expected), led by final demand services (-0.3%). The index for final demand goods decreased 0.4%.

The final demand index moved down 0.2% for the 12 months ended in July. Prices for final demand less foods, energy, and trade services were unchanged in July after rising 0.3% in June. For the 12 months ended in July, the index for final demand less foods, energy, and trade services increased 0.8%.

Final Demand

Final demand services: The index for final demand services fell 0.3% in July, the largest decline since moving down 0.3% in March. The July decrease can be traced to margins for final demand trade services, which fell 1.3%. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, prices for final demand services less trade, transportation, and warehousing advanced 0.2%, and the index for final demand transportation and warehousing services increased 0.1%.

Product detail: Nearly 60% of the decrease in prices for final demand services is attributable to margins for apparel, jewelry, footwear, and accessories retailing, which fell 6.0%. The indexes for machinery and equipment wholesaling; health, beauty, and optical goods retailing; food retailing; loan services (partial); and automotive fuels and lubricants retailing also declined. In contrast, prices for traveler accommodation services climbed 3.9%. The indexes for chemicals and allied products wholesaling and for securities brokerage, dealing, investment advice, and related services also moved higher.

Final demand goods: The index for final demand goods declined 0.4% in July following three straight increases. Almost half of the decrease can be traced to prices for final demand foods, which fell 1.1%. The index for final demand energy moved down 1.0%. Prices for final demand goods less foods and energy were unchanged.

Product detail: A major factor in the decrease in the index for final demand goods was prices for beef and veal, which fell 9.8%. Prices for gasoline, corn, motor vehicles, oilseeds, and iron and steel scrap also moved lower. Conversely, the index for utility natural gas advanced 4.3%. Prices for eggs for fresh use and nonferrous scrap also increased. 

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All of the not-seasonally adjusted price indexes we track rose 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.