US CRUDE, INTERMEDIATE CORE PRICE HIKES BROADER FOR 2ND MONTH
08:52 EDT 07/14 --Without Increases in Cars, Trucks, PPI Overall and Core Would Be Flat
By Denny Gulino
bonds-online.com
WASHINGTON (MktNews) - An unexpected decline in passenger car and light truck prices pulled the U.S. Producer Price Index and its core rate into negative territory in June, the Labor Department reported Wednesday, but for the second month, price hikes at the raw materials and intermediate levels broadened out.
The PPI's finished goods index was down 0.1% and the core rate was down 0.2%, contrary to anticipated increases of about the same size.
"If you had no influence from passenger cars and light trucks, that in fact those two indices, finished and core, would have been flat for the month," Bureau of Labor Statistics analyst Brian Catron told Market News International as the report was being made public.
"In passenger cars and light trucks, we had no seasonal expectations," he continued. "You get get discounting and the normal kind of model year tailing off through the summer months, with a typical decline in the July index ... and finally a fairly sizable decline in September. But this month there certainly was no seasonal factor," he continued. "The price decline that came in was apparently just competitively based."
The June results pulled the 12-month change in passenger car prices into a negative, down 0.5%. However prices for light trucks -- which include minivans, sport utilities and pickups -- show a 3.4% gain for 12 months.
"Step back to the earlier stages of processing you do see price increases," Catron said. Core crude materials were up 0.5%, as was core intermediate materials. For crude, "that's not particularly new," he said, noting the May increase in that category of 2.3%.
But intermediate core prices, which up until May had seen mostly construction related price hikes, began to show a broadening range of increases in May. Now, "for the second month in row that statement can be made," he said of both categories.
The intermediate core increase of 0.5% "was led by industrial chemicals, up 1.9%," he said. "We had an increase of 9.7% for plywood, influencing both construction materials and durable manufacturing materials categories. Softwood lumber went up 4.5%."
For the sake of comparison, he said, "that 4.5% is bigger than anything in the last two and a half years. That's not to say there haven't been some sizable swings, in the upper 3% range." Outside of construction, thermoplastic resins rose 2.2% in price in June, something influenced a great deal by rising energy prices," he said.
"In crude core materials, the two big categories are wastepaper, which had an 18.8% increase," an exceptionally big jump even for that volatile category, he said. Softwood logs, the other leader at the crude level, was a category up 2.0%.
Capital equipment prices declined 0.3% in June, the most since 0.4% in October of 1994, due to light trucks "which carries the weight in capital equipment," he said.
While gauging the degree of passthrough of core and intermediate prices to finished goods is a "very complex picture," the speed at which crude petroleum price increases influence the end stages can be seen in thermoplastic resins, he said.
Liquified petroleum gas, such as propane, uses crude petroleum as an input and jumped 11.7% in price in June, the main reason there was not a larger decline in energy prices. The overall energy index dropped 0.3% in June because of declines in gasoline and residential electric power, where "the seasonal factors look for a fairly considerable increase in rates this time of year," he said. "Some products pass through prices very quickly, like energy, and others are so slow," Catron said, as labor costs and productivity have their impact on overall costs.
Expectations in a Market News International survey of economists centered on a rise of 0.1% both in
the overall finished goods index and the PPI core rate for June. In the previous month, the PPI rose
0.2% overall and 0.1% in the core rate, both within expectations. |
