August 2018 Consumer and Producer Price Indices (incl. Forest Products)

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Consumer Price Index

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% in August (+0.3% expected). Increases in the indexes for shelter and energy were the main contributors to the seasonally adjusted monthly increase in the all items index. The energy index increased 1.9% in August; a 3.0% increase in the gasoline index was the largest factor, but the other energy component indexes also rose. The shelter index increased 0.3% in August, the same increase as in July. The food index rose only slightly in August, with the index for food at home unchanged.

The index for all items less food and energy rose 0.1% in August, the smallest monthly increase since April. Along with the shelter index, the indexes for airline fares and used cars and trucks were among those that increased in August.  An array of indexes declined, including apparel, medical care, communication, recreation, and personal care.

The all items index rose 2.7% for the 12 months ending August, a smaller increase than the 2.9% increase for the 12 months ending July. The index for all items less food and energy rose 2.2% for the 12 months ending August and the energy index increased 10.2%; these were both smaller increases than for the 12 months ending July. The food index increased 1.4% over the last 12 months, the same increase as for the period ending July.  

Producer Price Index

The Producer Price Index for final demand (PPI) declined 0.1% in August (+0.2% expected). Final demand prices were unchanged in July and increased 0.3% in June. The decline in the final demand index can be attributed to a 0.1% decrease in prices for final demand services. The index for final demand goods was unchanged.

On an unadjusted basis, the final demand index rose 2.8% for the 12 months ended in August. The index for final demand less foods, energy, and trade services edged up 0.1% in August after advancing 0.3% in both July and June. For the 12 months ended in August, prices for final demand less foods, energy, and trade services rose 2.9%.

Final Demand

Final demand services: The index for final demand services inched down 0.1% in August, the same as in July. The August decrease was led by a 0.9% decline in the index for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand transportation and warehousing services fell 0.6%. In contrast, the index for final demand services less trade, transportation, and warehousing rose 0.3%.

Product detail: In August, over 80% of the decrease in prices for final demand services can be traced to margins for machinery and equipment wholesaling, which fell 1.7%. The indexes for health, beauty, and optical goods retailing; application software publishing; airline passenger services; and hospital outpatient care also moved lower. Conversely, prices for loan services (partial) jumped 3.0%. The indexes for food retailing, bundled wired telecommunication access services, and physician care also rose.

Final demand goods: The index for final demand goods was unchanged in August after increasing in each of the prior three months. In August, a 0.4% advance in prices for final demand energy offset a 0.6% decline in the index for final demand foods. Prices for final demand goods less foods and energy were unchanged.

Product detail: In August, the index for residential electric power moved up 0.6%. Prices for fresh and dry vegetables, corn, gasoline, and passenger cars also increased. In contrast, the index for fresh fruits and melons dropped 11.3%. Prices for diesel fuel, meats, eggs for fresh use, and iron and steel scrap also declined. 

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The not-seasonally adjusted price indexes we track were mixed on a MoM basis, but all increased YoY. 

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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.