December 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 0.3% (as expected) in December. Continuing their recent trends, the shelter (rent: +0.3%) and gasoline (+3.0) indexes increased in December and were largely responsible for the seasonally adjusted all-items increase.

Recent trends also continued in the food indexes, as the food at home index again declined, offsetting an increase in the index for food away from home and leaving the overall food index unchanged for the sixth consecutive month. The energy index continued to rise, advancing 1.5% in December, primarily due to an increase in the gasoline index.

The index for all items less food and energy rose 0.2% in December, the same increase as in November. Along with the shelter index, the indexes for motor vehicle insurance, medical care, education, airline fares, used cars and trucks, and new vehicles were among the indexes that increased. The indexes for apparel and communication declined in December.  

The all items index rose 2.1% for the 12 months ending December. This figure has been steadily rising since July, and is the largest 12-month increase since the period ending June 2014. The index for all items less food and energy rose 2.2% and the energy index increased 5.4%. In contrast, the food index declined 0.2% over the last 12 months. Rent rose by 4.0% YoY, and medical services: +3.9%.

Producer Price Index

The seasonally adjusted producer price index for final demand (PPI) increased 0.3% (as expected) in December. Final demand prices advanced 0.4% in November and were unchanged in October. On an unadjusted basis, the final demand index climbed 1.6% in 2016 after falling 1.1% in 2015.

In December, nearly 80% of the advance in the final demand index is attributable to a 0.7% increase in prices for final demand goods. The index for final demand services inched up 0.1%.

Prices for final demand less foods, energy, and trade services moved up 0.1% in December after rising 0.2% in November. In 2016, the index for final demand less foods, energy, and trade services climbed 1.7% following a 0.3% advance in 2015.

Final Demand

Final demand goods: Prices for final demand goods jumped 0.7% in December, the largest increase since a 0.7% rise in June. Sixty percent of the December broad-based advance can be traced to the index for final demand energy, which climbed 2.6%. Prices for final demand goods less foods and energy rose 0.3%, and the final demand foods index increased 0.7%.

Product detail: Accounting for almost half of the December jump in final demand goods prices, the index for gasoline climbed 7.8%. Prices for light motor trucks, jet fuel, iron and steel scrap, chicken eggs, and liquefied petroleum gas also increased. In contrast, the index for fresh fruits and melons fell 13.6%. Prices for residential electric power and for plastic resins and materials also decreased.

Final demand services: The index for final demand services inched up 0.1% in December after increasing 0.5% in November. About 70% of the December advance can be attributed to prices for final demand services less trade, transportation, and warehousing, which rose 0.2%. The index for final demand trade services also advanced 0.2%. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, prices for final demand transportation and warehousing services declined 0.4%.

Product detail: Most of the December increase in the index for final demand services can be traced to prices for securities brokerage, dealing, investment advice, and related services, which advanced 4.4%. The indexes for machinery, equipment, parts, and supplies wholesaling; apparel, footwear, and accessories retailing; food retailing; and health, beauty, and optical goods retailing also moved higher. In contrast, prices for airline passenger services fell 2.4%. The indexes for fuels and lubricants retailing, loan services (partial), and apparel wholesaling also decreased. 

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The not-seasonally adjusted price indexes we track all rose 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.