US BLS: PETROLEUM PRICE LEVEL NOW AFFECTING PLASTICS, CHEMICALS
By Denny Gulino
WASHINGTON (MktNews) - The year's sustained acceleration of crude oil prices is beginning to have its effect on core U.S. Producer Price Index categories such as plastics and chemicals, a Bureau of Labor Statistics analyst said Friday, as the BLS reported a lower-than- expected core rate for November, a flat zero.
The overall finished goods index rose 0.2%, exactly where expectations centered, with energy prices up 1.4%, though not in the combination anticipated. Gasoline prices rose only 0.1% but heating oil jumped 7.5%, while the most heavily weighted energy category, residential electric power, rose 0.7%. "It happened to be a month where refined petroleum didn't lead the way," BLS analyst Brian Catron told Market News International as the PPI report was being made public.
Overall intermediate goods prices rose 0.3% and crude goods prices were up 4.0%. Core intermediate prices moved up a very modest 0.1% in November and core crude goods prices also decelerated to a 0.3% rise, from October's strong 2.4% increase.
"It was right down the line with expectations," Catron said. "I guess they were all guessing right about what energy would do, go up -- and it did."
Looking at non-energy items at all three stages of processing has shown the December 1998 through November 1999 rise in crude petroleum prices of a spectacular 153.6% is now nudging up prices for core items for which petroleum is a raw material, he said.
"Something we've kind of been watching for, yanking food and energy out of all three stages of processing," Catron said of the spreading influence of the oil price level. "We were looking at a couple of commodities, sort of focused on petroleum as an important input material," with crude petroleum prices in 1999 up 153.6%.
"If you look at the downstream consumers, you see plastic resins and materials up 15.8% over the same period," he said. "Primary organic chemicals are up 36.5%, so it seems to show some evidence these sustained increases in crude petroleum are evidenced in the 'without energy' indexes we have around here," he said. Next month, when the 12-month recapitulation no longer includes December 1998's 20.2% decline in crude oil prices, the 12-month increases could be even more dramatic, he said.
How the producers of plastics materials and some chemicals actually handle the increases in the price of a main input is "as foggy as ever," he said, since they can absorb the increase, pass it on or switch to imported resins and chemicals.
Auto prices were up 0.2% in the November PPI and light motor truck prices fell 1.1%.
The year-to-date annual change for the finished goods index is 2.9% through November and the 12-month cumulative change is a 3.1% increase.
In the intermediate core area, some prices were up a lot despite the overall 0.1% increase. Some examples, Catron said, "would be basic organic chemicals, up 0.9%. And it had some help from paper, up 1.0% at intermediate core. Plastic construction products are up 0.9%."
Crude core "has been the wild child, bouncing all over the place," he said, with three increases above 2% in seven months. A "short list" of movers were iron and steel scrap, up 6.9% and wastepaper up 5.9%. Offsetting, were non-ferrous metals ores, down 6.9%, and cattle hides, down 10.1%.
Expectations in a Market News International survey of economists centered on a 0.2% increase in the November PPI's finished goods index and a 0.1% rise in the core rate. PPI overall had surged 1.1% in September and fell 0.1% in October. |
