December 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) declined 0.1% in December (-0.1% expected). The seasonally adjusted decline in the all items index was caused by a sharp decrease in the gasoline index, which fell 7.5% in December. This decline more than offset increases in several indexes including shelter, food, and other energy components. The energy index fell 3.5%, as the gasoline and fuel oil indexes fell, but the indexes for natural gas and for electricity increased. The food index increased 0.4% in December.

The index for all items less food and energy increased 0.2% in December, the same increase as in October and November. Along with the index for shelter, the indexes for recreation, medical care, and household furnishings and operations all increased in December, while the indexes for airline fares, used cars and trucks, and motor vehicle insurance all declined.

The all items index increased 1.9% for the 12 months ending December; this was the first time the 12-month change has been under 2.0% since August 2017. The index for all items less food and energy rose 2.2% over the last 12 months, the same increase as for the 12 months ending November. The food index rose 1.6% over the past year, while the energy index declined 0.3%.

Producer Price Index

The Producer Price Index for final demand (PPI) fell 0.2% in December (-0.1% expected). Final demand prices advanced 0.1% in November and 0.6% in October. In December, 80% of the decrease in the final demand index is attributable to a 0.4% decline in prices for final demand goods. The index for final demand services edged down 0.1%.

On a year-over-year basis, the final demand index moved up 2.5% in December. The index for final demand less foods, energy, and trade services was unchanged in December following a 0.3% rise in November. In 2018, prices for final demand less foods, energy, and trade services advanced 2.8% following a 2.3% increase in 2017.

Final Demand

Final demand goods: The index for final demand goods moved down 0.4% in December, the same as in November. In December, the decline was the result of a 5.4% drop in the index for final demand energy. In contrast, prices for final demand foods advanced 2.6%, and the index for final demand goods less foods and energy rose 0.1%.

Product detail: Leading the December decrease in the index for final demand goods, gasoline prices dropped 13.1%. The indexes for diesel fuel, basic organic chemicals, jet fuel, residual fuels, and beef and veal also moved down. Conversely, prices for fresh fruits and melons jumped 48.9%. The indexes for construction machinery and equipment and for residential natural gas also increased. (See table 4.)

Final demand services: Prices for final demand services edged down 0.1% in December after increasing for three straight months. The decline was led by a 0.3% decrease 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 0.2%. In contrast, the index for final demand services less trade, transportation, and warehousing inched up 0.1%.

Product detail: The December decrease in prices for final demand services was led by margins for food retailing, which fell 2.5%. The indexes for cellular phone and other wireless telecommunication services, automotive fuels and lubricants retailing, residential real estate loans (partial), and airline passenger services also moved lower. Conversely, prices for guestroom rental rose 2.9%. The indexes for inpatient care, machinery and equipment parts and supplies wholesaling, and long-distance motor carrying also increased. 

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The not-seasonally adjusted price indexes we track were mixed on both MoM and YoY bases. It appears softwood lumber has stopped retreating. 

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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.