In the aftermath of a series of "better than expected", and thus "taper on" economic data, there is just one wildcard remaining for the Fed: inflation, or rather the lack thereof. And while next week's CPI report will be very closely watched in this regard, producer prices also provide a glimpse into pricing pressures and resource slack. And judging by the just announced -0.1% drop in finished goods producer prices in the month of November, below the 0.0% expected if up from last month's -0.2%, which happens to be the third consecutive decline in overall PPI, a first in the past year, the Fed's December taper decision just got even more complicated. Looking into the components, core PPI rose by the tiniest possible fraction, or 0.1%, in line with expectations, while it was energy prices that dipped 0.4%, pulling the overall number lower with the BLS noting that home heating oil's 5.7% decline was among the key culprits for the drop. Food producer prices were unchanged for the month, with higher prices for pork offset by lower prices for processed young chickens.
At the earlier stages of processing, prices received by manufacturers of intermediate goods declined 0.5 percent, and the crude goods index fell 2.6 percent
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Monthly breakdown by component:
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Broken down by processing stage:
Finished goods
In November, the decrease in the finished goods index can be traced to a 0.4-percent decline in prices for finished energy goods. By contrast, prices for finished goods less foods and energy advanced 0.1 percent. The index for finished consumer foods was unchanged.
Finished energy: The index for finished energy goods declined 0.4 percent in November after falling 1.5 percent in October. Nearly three-quarters of the November decrease is attributable to gasoline prices, which moved down 0.7 percent. Lower prices for diesel fuel and home heating oil also were factors in the decline in the index for finished energy goods. (See table 2.)
Finished core: The index for finished goods less foods and energy inched up 0.1 percent in November, the third consecutive advance. Leading the November rise, prices for light motor trucks increased 0.6 percent. Higher prices for agricultural machinery and equipment also contributed to the advance in the finished core index.
Finished foods: Prices for finished consumer foods were unchanged in November subsequent to a 0.8- percent rise a month earlier. In November, higher prices for pork were offset by lower prices for processed young chickens.
Intermediate goods
The Producer Price Index for intermediate materials, supplies, and components fell 0.5 percent in November, the largest decline since a 0.6-percent drop in April 2013. Accounting for over two-thirds of the broad-based November decrease, prices for intermediate energy goods moved down 1.5 percent. The index for intermediate foods and feeds fell 0.9 percent and prices for intermediate materials less foods and energy inched down 0.1 percent. For the 12 months ended in November, the intermediate goods index declined 0.5 percent, the third straight 12-month decrease. (See table B.)
Intermediate energy: The index for intermediate energy goods moved down 1.5 percent in November, the largest decrease since a 1.8-percent decline in April 2013. Nearly three-fifths of the November drop can be traced to prices for diesel fuel, which fell 5.6 percent. Decreases in the indexes for jet fuel and lubricating oil base stocks also contributed to the decline in prices for intermediate energy goods. (See table 2.)
Intermediate foods: In November, the index for intermediate foods and feeds decreased 0.9 percent after falling 1.5 percent a month earlier. More than half of the November decline is attributable to prices for prepared animal feeds, which moved down 2.4 percent. A decrease in the index for refined sugar and by-products also factored into lower prices for intermediate foods and feeds.
Intermediate core: Prices for intermediate materials less foods and energy edged down 0.1 percent in November, the same as in October. The November decrease was led by the index for basic organic chemicals, which fell 2.0 percent.
Crude goods
The Producer Price Index for crude materials for further processing declined 2.6 percent in November. For the 3 months ended in November, prices for crude goods fell 3.0 percent following a 1.3-percent decrease for the 3 months ended in August. The monthly decline in November was led by the index for crude energy materials, which dropped 6.6 percent. Lower prices for crude foodstuffs and feedstuffs also contributed to the decrease, declining 0.3 percent. By contrast, the index for crude nonfood materials less energy advanced 1.4 percent. (See table B.)
Crude energy: The index for crude energy materials decreased 6.6 percent in November. From August to November, prices for crude energy materials fell 7.4 percent after rising 1.8 percent from May to August. In November, most of the monthly decline can be traced to an 11.7-percent drop in the index for crude petroleum. Lower prices for coal also were a factor in the decrease in the index for crude energy materials. (See table 2.)
Crude foods: The index for crude foodstuffs and feedstuffs moved down 0.3 percent in November. For the 3 months ended in November, prices for crude foodstuffs and feedstuffs rose 0.5 percent compared with a 5.4-percent decrease for the 3 months ended in August. The monthly decline in November was led by the index for corn, which fell 4.5 percent. Lower prices for slaughter barrows and gilts also contributed to the decrease in the crude foods index.
Crude core: The index for crude nonfood materials less energy advanced 1.4 percent in November. From August to November, prices for crude nonfood materials less energy were unchanged after moving down 0.8 percent from May to August. Leading the monthly increase in November, the index for carbon steel scrap rose 6.0 percent. Higher prices for gold ores also were a factor in the advance in the crude core index.
Source: BLS [9]