Producer Price Index: Rising Energy Costs Hits Manufacturing
The Bureau of Labor Statistics reported today that the producer price index (PPI) for finished goods rose 0.8 percent in April, building on the 1.0, 1.6, and 0.8 percentage point gains in the first three months of this year, respectively. (All of these figures are seasonally adjusted at annual rates.) Core inflation, which excludes food and energy costs, remained unchanged from the previous month, rising 0.3 percent.
Looking at the net output of manufacturing firms, the PPI rose 1.5 percent for the month and 8.5 percent from last year. Industries with the largest monthly increases in producer prices for April were petroleum and coal products, fabricated metal products, textile products, and food manufacturers.
The accompanying figure shows both the traditional and core PPI measures for the past year for each month. Each in each, core inflation has been modest, never rising above a monthly gain of 0.5 percent. Overall PPI, however, has shifted from deflationary pressures this time last year to a much faster pace in the past few months. Rising energy and raw material costs are having an impact.
When examining the PPI at different stages during the production process, it is also clear that pricing pressures exist for both intermediate and crude goods, as well. The PPI for intermediate goods rose 1.3 percent in April, with crude good prices up 4.0 percent.
Chad Moutray is chief economist, National Association of Manufacturers.