CARS, TRUCKS DRIVE OCT PPI CORE ABOVE EXPECTATIONS
By Chris Middleton
WASHINGTON (MktNews) - Stronger than expected wholesale prices in passenger cars and light trucks drove up the core number of the U.S. Producer Price Index by two tenths of a percentage point in October, repeating last month's surprising strength in that category, a Bureau of Labor Statistics analyst said Wednesday.
Passenger cars rose 1.1% and light motor trucks 0.8% in October, "in some ways a sort of repetition of last month," when cars rose 2.0% and trucks were also up 0.8%, BLS analyst Joe Kowal, told Market News International as the report was being made public.
Overall PPI for October declined 0.1%, at the low end of expectations, while the index minus food and energy was up 0.3%, higher than forecasts.
Kowal noted that the introduction of new models at this time of the year, especially October, "introduces a lot of variability" in the auto prices, usually accounted for with a strong seasonal adjustment. He gave no definitive reason for the increase, but said about "two tenths (of the core and overall PPI) came from the rising indexes in cars and trucks."
Even with the two-month surge in transportation, much of the overall effect of the end of the model year price changes was negated by notable declines earlier in the year. "If you take into account last year's figures, the rise (0.3% year over year) is basically negligible, ... we're basically the same as we were a year ago," Kowal said.
But he added that the picture is a little different in the light trucks category, which is up 1.3% from last October. Levels over the last two years have been fairly steady, though, Kowal said.
Also driving the upward movement in the core PPI was drugs, which rose 1.2%, with no particular item driving this category, Kowal said. Basically, "there was not a lot of action outside of cars and trucks," he said.
Looking at the headline number's decline, Kowal cited the obvious impact of the 1.0% decline in energy prices, lead by gasoline -3.8% and heating oil -5.5%. Finished consumer foods were down 0.7 for the month.
The BLS also released its report on quality changes for 2000 model year vehicles, which Kowal said had no direct impact on the October price surge. He said this measurement is done annually to calibrate auto prices.
Kowal said, "This is a regular event for motor vehicles. We have to take into consideration the quality ... the changes have to be netted out."
The BLS said "the value of quality changes for a sample of 14 2000 model year domestic passenger cars included in the Producer Price Index for October averaged $153.92, according to estimates. ... This change represents 42.3% of the average $363.60 yearly increase in producers' prices."
Expectations in a Market News International survey had centered on an increase of 0.1% in both the overall and core PPI.
>>>It's a wonder there's any reported inflation at all with
>>>the BLS factoring out half of the price changes with the
>>>bogus quality adjustments. One would think a 10 year old
>>>would be more expensive than a new car the way they
>>>figure. |
