December 2021 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 0.5% (+0.4% expected) in December after rising 0.8% in November. Increases in the indexes for shelter and for used cars and trucks were the largest contributors to the seasonally adjusted all-items increase. The food index also contributed, although it increased less than in recent months, rising 0.5% in December. The energy index declined in December, ending a long series of increases; it fell 0.4% as the indexes for gasoline and natural gas both decreased.

The index for all items less food and energy rose 0.6% in December following a 0.5% increase in November. This was the sixth time in the last 9 months it has increased at least 0.5%. Along with the indexes for shelter and for used cars and trucks, the indexes for household furnishings and operations, apparel, new vehicles, and medical care all increased in December. As in November, the indexes for motor vehicle insurance and recreation were among the few to decline over the month.

The all-items index rose 7.0% for the 12 months ending December, the largest 12-month increase since the period ending June 1982. The all items less food and energy index rose 5.5%, the largest 12-month change since the period ending February 1991. The energy index rose 29.3% over the last year, and the food index increased 6.3%.

Producer Price Index

The Producer Price Index for final demand (PPI-FD) increased 0.2% in December (+0.4% expected). This rise followed advances of 1.0% in November and 0.6% in October. On an unadjusted basis, final demand prices moved up 9.7% in 2021, the largest calendar-year increase since data were first calculated in 2010.

In December, the advance in the final demand index can be traced to a 0.5% increase in prices for final demand services. Conversely, the index for final demand goods decreased 0.4%.

Prices for final demand less foods, energy, and trade services rose 0.4% in December following a 0.8% increase in November. In 2021, the index for final demand less foods, energy, and trade services moved up 6.9%, following a 1.3% advance in 2020.

Final Demand

Final demand services: Prices for final demand services rose 0.5% in December following a 0.9% increase in November. Over half of the broad-based advance in December is attributable to margins for final demand trade services, which moved up 0.8%. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services rose 0.2% and 1.7%, respectively.

Product detail: Over a quarter of the December increase in the index for final demand services can be attributed to margins for fuels and lubricants retailing, which rose 13.0%. The indexes for airline passenger services, food retailing, machinery and vehicle wholesaling, machinery and equipment parts and supplies wholesaling, and traveler accommodation services also moved higher. In contrast, margins for automobile and automobile parts retailing decreased 2.7%. The indexes for deposit services (partial) and for health, beauty, and optical goods retailing also declined.

Final demand goods: The index for final demand goods moved down 0.4% in December, the first decrease since falling 2.8% in April 2020. Leading the December decline, prices for final demand energy dropped 3.3%. The index for final demand foods fell 0.6%. Conversely, prices for final demand goods less foods and energy advanced 0.5%.

Product detail: A major factor in the December decrease in prices for final demand goods was the index for gasoline, which moved down 6.1%. Prices for meats, gas fuels, fresh and dry vegetables, diesel fuel, and primary basic organic chemicals also declined. In contrast, the index for ethanol increased 6.4%. Prices for residential electric power and for chicken eggs also moved higher.

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With the exception of intermediate materials, the not-seasonally adjusted price indexes we track all advanced on both a MoM and 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.