August 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 August (+0.1% expected), mainly on a rise in the index for all items less food and energy. The all items less for and energy index increased 0.3%, as the indexes for shelter (rent: +0.3%) and medical care (+0.9%) advanced.

The energy and food indexes were both unchanged in August. Major energy component indexes were mixed, with increases in the indexes for natural gas and electricity offsetting declines in the gasoline and fuel oil indexes. The food at home index declined for the fourth month in a row, offsetting an increase in the index for food away from home.  

The 0.3% increase in the index for all items less food and energy was the largest rise since February 2016. Along with shelter and medical care, the indexes for motor vehicle insurance, apparel, communication, and tobacco all increased. In contrast, the indexes for used cars and trucks, household furnishings and operations, recreation, and airline fares all declined in August.

The all items index rose 1.1% for the 12 months ending August, a larger increase than the 0.8% rise for the 12 months ending July. The index for all items less food and energy rose 2.3% for the 12 months ending August. The food index was unchanged over the last year, while the energy index declined 9.2%; rent jumped 3.8% YoY, and medical care services +5.1%.

Producer Price Index

The seasonally adjusted producer price index for final demand (PPI) was unchanged in August (+0.1% expected) as a 0.1% advance in the index for final demand services offset a 0.4% decrease. Prices for final demand less foods, energy, and trade services increased 0.3% in August after no change in July.

On an unadjusted basis, the final demand index was unchanged for the 12 months ended in August. However, the index for final demand less foods, energy, and trade services moved up 1.2%, the largest rise since climbing 1.3% for the 12 months ended December 2014.

Final demand services: The index for final demand services edged up 0.1% in August following a 0.3% decline in July. The advance can be traced to prices for final demand services less trade, transportation, and warehousing, which increased 0.5%. In contrast, the index for final demand trade services fell 0.6%. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand transportation and warehousing services moved down 0.4%.

Product detail: Within the index for final demand services in August, prices for outpatient care (partial) advanced 0.5%. The indexes for apparel, jewelry, footwear, and accessories retailing; guestroom rental; portfolio management; and residential real estate services (partial) also moved higher. Conversely, margins for machinery and equipment wholesaling decreased 2.9%. The indexes for chemicals and allied products wholesaling, services related to securities brokerage and dealing, and airline passenger services also declined.

Final demand goods: The index for final demand goods fell 0.4% in August, the same as in July. Eighty% of the August decrease can be traced to a 1.6% drop in prices for final demand foods. Also contributing to the decline in the index for final demand goods, prices for final demand energy moved down 0.8%. In contrast, the index for final demand goods less foods and energy inched up 0.1%.

Product detail: Thirty percent of the August decrease in the index for final demand goods is attributable to a 3.6% drop in prices for meats. The indexes for gasoline, fresh and dry vegetables, jet fuel, chicken eggs, and diesel fuel also fell. Conversely, prices for pharmaceutical preparations increased 1.0%. The indexes for electric power and natural, processed, and imitation cheese also rose. 

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The not-seasonally adjusted price indexes we track were mixed on both MoM and YoY bases. 

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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.