February 2017 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 0.1% (as expected) in February -- the smallest MoM rise since July 2016. The gasoline index declined, partially offsetting increases in several indexes, including food, shelter, and recreation. The energy index fell 1.0%, with the decline in gasoline outweighing increases in the other energy component indexes. The food index increased 0.2% over the month, its largest rise since September 2015.

The index for all items less food and energy rose 0.2% in February. The indexes for shelter, recreation, apparel, airline fares, motor vehicle insurance, education, and medical care were among those that increased in February. Indexes that declined include communication, used cars and trucks, new vehicles, and household furnishings and operations. 

The all-items index rose 2.7% for the 12 months ending February; the 12-month increase has been trending upward since a July 2016 trough of 0.8%. The index for all items less food and energy rose 2.2% over the last 12 months; this was the fifteenth straight month the 12-month change remained in the range of 2.1 to 2.3%. The energy index rose 15.2% over the last year, while the food index was unchanged. Rent rose by 3.9% YoY, and medical services: +3.4%.

Producer Price Index

The seasonally adjusted producer price index for final demand (PPI) increased 0.3% (+0.1% expected) in February. Final demand prices rose 0.6% in January and 0.2% in December. Over 80% of the advance in the final demand index is attributable to a 0.4% increase in prices for final demand services; final demand goods moved up 0.3%.

Prices for final demand less foods, energy, and trade services rose 0.3% in February, the largest increase since a 0.3% advance in April 2016. For the 12 months ended in February, the index for final demand less foods, energy, and trade services climbed 1.8%.

The final demand index climbed 2.2% for the 12 months ended February 2017, the largest YoY advance since a 2.4% increase in March 2012.

Final Demand

Final demand services: The index for final demand services moved up 0.4% in February, the largest advance since a 0.4% increase in June 2016. Nearly 70% of the February rise can be traced to prices for final demand services less trade, transportation, and warehousing, which climbed 0.5%. The indexes for final demand trade services and for final demand transportation and warehousing services advanced 0.4% and 0.3%, respectively.

Product detail: In February, a major factor in the increase in prices for final demand services was the index for traveler accommodation services, which rose 4.3%. The indexes for chemicals and allied products wholesaling; legal services; apparel wholesaling; health, beauty, and optical goods retailing; and architectural and engineering services also moved higher. In contrast, the index for automotive fuels and lubricants retailing fell 10.0%. Prices for wireless telecommunication services and for securities brokerage, dealing, and investment advice also decreased.

Final demand goods: Prices for final demand goods moved up 0.3% in February, the sixth consecutive rise. Over half of the broad-based February increase can be traced to the index for final demand energy, which advanced 0.6%. Prices for final demand foods and for final demand goods less foods and energy moved up 0.3% and 0.1%, respectively.

Product detail: Nearly 70% of the February increase in prices for final demand goods is attributable to the index for electric power, which climbed 1.6%. Prices for fresh and dry vegetables, jet fuel, liquefied petroleum gas, pharmaceutical preparations, and residual fuels also rose. Conversely, the index for gasoline fell 2.5%. Prices for beef and veal and for search, detection, navigation, and guidance systems and equipment also decreased. 

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Virtually all of the not-seasonally adjusted price indexes we track rose on a MoM basis, and all moved higher on a YoY basis. 

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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.