July 2020 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 0.6% in July (0.3% expected). The gasoline index continued to rise in July after increasing sharply in June and accounted for about one quarter of the monthly increase in the seasonally adjusted all-items index. The energy index increased 2.5% in July as the gasoline index rose 5.6%. This was partially offset by the food index, which decreased 0.4% in July, with the index for food at home declining 1.1%.

The index for all items less food and energy rose 0.6% in July, its largest increase since January 1991. The index for motor vehicle insurance increased sharply in July, as it did the previous month. The indexes for shelter, communication, used cars and trucks, and medical care also increased in July, while the index for recreation declined.

The all-items index increased 1.0% for the 12 months ending July, a larger increase than the 0.6% rise for the period ending June. The index for all items less food and energy increased 1.6% over the last 12 months. The food index increased 4.1% over the last 12 months, with the index for food at home rising 4.6%. Despite increasing in July, the energy index fell 11.2% over the last 12 months.

 

Producer Price Index

The Producer Price Index for final demand (PPI-FD) increased 0.6% in July (+0.3% expected). This rise followed a 0.2% decline in June and a 0.4% advance in May. The July increase is the largest rise since a 0.7% advance in October 2018. On an unadjusted basis, the final demand index moved down 0.4% for the 12 months ended in July.

In July, the advance in the final demand index was led by a 0.5% rise in prices for final demand services. The index for final demand goods also moved higher, increasing 0.8%.

Prices for final demand less foods, energy, and trade services advanced 0.3% in July, the same as in June. For the 12 months ended in July, the index for final demand less foods, energy, and trade services edged up 0.1%, following three straight 12-month declines.

Final Demand

Final demand services: The index for final demand services moved up 0.5% in July, the largest advance since climbing 0.5% in April 2019. In July, about 60% of the rise can be traced to a 0.4% increase in prices for final demand services less trade, transportation, and warehousing. Margins for final demand trade services also moved higher, advancing 0.8%. (Trade indexes measure changes in margins received by wholesalers and retailers.) In contrast, prices for final demand transportation and warehousing services fell 0.8%.

Product detail: In July, a 7.8% rise in the index for portfolio management was a major factor in the advance in prices for final demand services. The indexes for machinery and vehicle wholesaling, automobiles and automobile parts retailing, long-distance motor carrying, legal services, and machinery and equipment parts and supplies wholesaling also moved higher. Conversely, prices for airline passenger services decreased 7.0%. The indexes for automotive fuels and lubricants retailing and for guestroom rental also declined.

Final demand goods: The index for final demand goods rose 0.8% in July, the third consecutive advance. Leading the July increase, prices for final demand energy climbed 5.3%. The index for final demand goods less foods and energy moved up 0.3%. In contrast, prices for final demand foods declined 0.5%.

Product detail: Over one-third of the July advance in the index for final demand goods is attributable to gasoline prices, which rose 10.1%. The indexes for diesel fuel, home heating oil, electric power, fluid milk products, and industrial chemicals also increased. Conversely, meat prices fell 8.0%. The indexes for residential natural gas and carbon steel scrap also decreased.

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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.