October 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 0.4% in October (+0.4% expected). As in September, increases in the shelter and gasoline indexes were the main causes of the rise in the all-items index. The gasoline index rose 7.0% in October and accounted for more than half of the increase in the all-items index. The shelter index increased 0.4% for the second straight month.

The energy index increased 3.5%, its largest advance since February 2013. The indexes for fuel oil and gasoline were up 5.9% and 7.0%, respectively, while the indexes for electricity and natural gas saw relatively smaller increases of 0.4% and 0.9%. In contrast, the index for food was unchanged for the fourth consecutive month, as the food-at-home index continued to decline.

The index for all items less food and energy rose 0.1% for the second straight month. Along with the shelter index, the indexes for apparel, new vehicles, and motor vehicle insurance all increased in October, as did the indexes for education, household furnishings and operations, alcoholic beverages, and tobacco. The indexes for personal care, communication, used cars and trucks, recreation, and airfare all declined. The medical care index was flat over the month.

The all-items index rose 1.6% for the 12 months ending October, its largest 12-month increase since October 2014. The index for all items less food and energy rose 2.1%. The food index declined 0.4% over the span, while the energy index rose 0.1%. Rent increased 3.8%; medical services: +4.1%.

Producer Price Index

The seasonally adjusted producer price index for final demand (PPI) was unchanged in October (+0.3% expected). A 0.4% increase in the index for final demand goods offset a 0.3% decline in prices for final demand services. Prices for final demand less foods, energy, and trade services (core PPI) edged down 0.1% in October after rising 0.3% in both August and September.

The final demand index increased 0.8% for the 12 months ended in October, the largest 12-month rise since advancing 0.9% in December 2014. For the 12 months ended in October, the core PPI advanced 1.6%, the largest increase since climbing 1.7% for the 12 months ended September 2014.

Final Demand

Final demand goods: Prices for final demand goods moved up 0.4% in October, the second straight increase. Most of the October advance can be attributed to a 2.5% rise in the index for final demand energy. Prices for final demand goods less foods and energy inched up 0.1%. In contrast, the index for final demand foods declined 0.8%.

Product detail: The October increase in the index for final demand goods can be traced primarily to a 9.7% jump in gasoline prices. The indexes for light motor trucks, beef and veal, industrial chemicals, jet fuel, and liquefied petroleum gas also advanced. Conversely, the index for fresh and dry vegetables fell 5.0%. Prices for electric power and for iron and steel scrap also decreased.

Final demand services: In October, prices for final demand services fell 0.3% following a 0.1% rise in both August and September. The decrease was led by the index for final demand services less trade, transportation, and warehousing, which declined 0.3%. Prices for final demand trade services also fell 0.3%. (Trade indexes measure changes in margins received by wholesalers and retailers.) In contrast, the index for final demand transportation and warehousing services increased 0.2%.

Product detail: A major factor in the October decrease in the index for final demand services was prices for securities brokerage, dealing, investment advice, and related services, which fell 5.7%. The indexes for food and alcohol retailing; fuels and lubricants retailing; apparel, jewelry, footwear, and accessories retailing; consumer loans (partial); and hospital outpatient care also moved lower. Conversely, prices for truck transportation of freight increased 0.3%. The indexes for machinery, equipment, parts, and supplies wholesaling and guestroom rental also advanced. 

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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.