July 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) rose 0.1% in July (+0.2% expected). The indexes for shelter, medical care, and food all rose in July, leading to the seasonally adjusted increase in the all items index. The energy index declined slightly in July, with its major component indexes mixed. The index for natural gas declined, while the electricity index rose and the gasoline index was unchanged. The food index increased 0.2%, with the indexes for food at home and food away from home both rising.

The index for all items less food and energy rose 0.1%, the fourth month in a row it increased by that amount. The indexes for shelter, medical care, recreation, apparel, motor vehicle insurance, and airline fares all rose in July. These increases more than offset declines in the indexes for new vehicles, communication, used cars and trucks, and household furnishings and operations.   

The all items index rose 1.7% for the 12 months ending July, a slightly larger increase than for the 12 months ending June. The index for all items less food and energy also rose 1.7% for the 12 month period, the same increase as for the 12 months ending May and June. The energy index rose 3.4% over the last year, while the food index increased 1.1%. Rent rose by 3.8%; health insurance: +1.2%.

Producer Price Index

The seasonally adjusted producer price index for final demand (PPI) declined 0.1% in July (+0.1 expected). Final demand prices inched up 0.1% in June and were unchanged in May. Over 80% of the July decrease in final demand prices is attributable to the index for final demand services, which fell 0.2%. Prices for final demand goods edged down 0.1%.

On an unadjusted basis, the final demand index increased 1.9% for the 12 months ended in July. The index for final demand less foods, energy, and trade services was unchanged in July following a 0.2-percent advance in June. For the 12 months ended in July, prices for final demand less foods, energy, and trade services rose 1.9%.

Final Demand

Final demand services: The index for final demand services moved down 0.2% in July, the first decline since a 0.3-percent drop in February. Most of the July decrease can be traced to margins for final demand trade services, which fell 0.5%. (Trade indexes measure changes in margins received by wholesalers and retailers.) Additionally, prices for final demand transportation and warehousing services declined 0.8%. In contrast, the index for final demand services less trade, transportation, and warehousing advanced 0.2%.

Product detail: About 60% of the July decrease in prices for final demand services is attributable to a 5.8-percent drop in margins for chemicals and allied products wholesaling. The indexes for machinery and equipment wholesaling; portfolio management; apparel, footwear, and accessories retailing; airline passenger services; and fuels and lubricants retailing also moved lower. Conversely, prices for traveler accommodation services rose 2.2%. The indexes for apparel wholesaling and hospital outpatient care also increased.

Final demand goods: Prices for final demand goods edged down 0.1% in July after inching up 0.1% in June. In July, the index for final demand energy fell 0.3%, and prices for final demand goods less foods and energy declined 0.1%. The index for final demand foods was unchanged.

Product detail: A major factor in the July decrease in prices for final demand goods was the index for gasoline, which moved down 1.4%. Prices for beef and veal, utility natural gas, motor vehicles, and basic organic chemicals also fell. In contrast, the index for grains jumped 17.1%. Prices for diesel fuel; pork; and consumer, institutional, and commercial plastic products also moved higher. 

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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.