September’s consumer price and producer price indexes; August’s wholesale inventories

The key reports released this past week were the September Consumer Price Index, the September Producer Price Index, and the September Import-Export Price Index from the Bureau of Labor Statistics, which together give us most of the information needed to adjust other September data for inflation in order to determine the real level of economic activity for the month….in addition, the Census Bureau released the August report on Wholesale Trade, Sales and Inventories, which we watch for inventories…

Consumer Prices Rose 0.1% in September on Higher Rent and other Services

The consumer price index inched higher in September, as lower prices for groceries, energy and most goods were more than offset by higher prices for services…the Consumer Price Index  Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.1% in September after rising 0.2% in August, 0.2% in July, 0.1% in June, 0.2% in May, 0.2% in April but after falling 0.1% in March after it had risen by 0.2% in February, 0.5% in January, 0.1% in December, 0.4% in November, 0.1% in October, and by 0.5% last September…the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 252.146 in August to 252.439 in September, which left it statistically 2.277% higher than the 246.819 index reading in August of last year, which is reported as a 2.3% increase….however, even with lower prices for groceries and energy, seasonally adjusted core prices, which exclude food and energy, also rose by 0.1% for the month, with the unadjusted core price index rising from 258.012 to 258.429, which left the core index 2.170% ahead of its year ago reading of 252.941, which is reported as a 2.2% annual increase, same as last month’s..

The volatile seasonally adjusted energy price index fell by 0.5% in September, after it had increased by 1.9% in August, decreased by 0.3% in July and by 0.3% in June, increased by 0.9% in May and by 1.4% in April, decreased by 2.8% in March, increased by 0.1% in February and by 3.0% in January, and hence is still 4.8% higher than in September a year ago…prices for energy commodities were 0.2% lower in September, while the index for energy services fell by 0.8%, after rising by 0.4% in August…the energy commodity index was lower due to a 0.2% decrease in price of gasoline, the largest component, while the index for fuel oils rose 0.3%, and prices for other energy commodities, such as propane, kerosene, and firewood, averaged 0.2% higher…within energy services, the index for utility gas service fell by 1.7% after rising by 0.9% in August and is now priced 1.2% lower than it was a year ago, while the electricity price index was down 0.5%, after it was up 0.3% in August….energy commodities are still 9.6% higher than their year ago levels, with gasoline prices averaging 9.1% higher than they were a year ago, while the energy services price index is now 1.2% lower than last September, as electricity prices have also decreased by 1.2% over that period…

The seasonally adjusted food price index was unchanged in September, after rising 0.1% in August, 0.1% in July, 0.2% in June, being unchanged in May, rising 0.3% in April, 0.1% in March, being unchanged in February, rising 0.2% in January, 0.2% in December, being unchanged in October and November, and rising 0.1% last September, as the index for food purchased for use at home fell 0.1% September, while prices for food bought for eating away from home were 0.2% higher, as prices at fast food outlets rose 0.3% and prices at full service restaurants rose 0.1%, while food prices at employee sites and schools were 1.4% lower…

In the food at home categories, the price index for cereals and bakery products was 0.6 higher even though bread prices fell 0.6%, because prices for flour and prepared flour mixes rose 1.2%, cookies prices rose 1.5%, and the index for frozen and refrigerated bakery products, pies, tarts and turnovers rose 1.9%…on the other hand, the price index for the meats, poultry, fish, and eggs group was 1.0% lower, as the fish and seafood price index fell 1.4% prices for beef roasts fell 1.7%, and egg prices were 4.1% lower….at the same time, the index for dairy products was 0.3% lower, on a 1.3% decrease in the price of fresh whole milk…in addition, the fruits and vegetables index was 0.5% lower on 0.6% decreases in both the price index for fresh fruits and the price index for fresh vegetables….meanwhile the beverages index was 0.6% higher, as noncarbonated juices and drink prices were priced 1.3% higher…lastly, the index for the ‘other foods at home’ category was up 0.2%, as the index for sugar and sweets rose 1.3% and the index for salt and other seasonings and spices rose 1.2%….among food at home line items, only prices for eggs, which are still up 10.1% since last September, have seen prices increase more than 10% over the past year, while no food item has fallen in price by more than 10% over the past year…the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2 for this release, which gives us a line item breakdown for prices of more than 200 CPI items overall

Among the seasonally adjusted core components of the CPI, which rose by 0.1% in September after rising by 0.1% in August, 0.2% in July,0.2% in June, 0.2% in May, 0.1% in April, 0.1% in March, 0.2% in February, 0.3% in January, 0.3% in December, 0.1% in November, 0.2% in October, 0.1% in September, 0.2% in August and by 0.1% in each of the prior 4 months, the composite of all goods less food and energy goods was down 0.3% in September, while the more heavily weighted composite for all services less energy services was 0.2% higher….among the goods components, which will be used by the Bureau of Economic Analysis to adjust September retail sales for inflation in national accounts data, the index for household furnishings and supplies increased by 0.2%, as the index for furniture and bedding rose 0.8% and the index for window and floor coverings was 1.1% higher…at the same time, the apparel price index was 0.9% higher, as prices for women’s outerwear rose 9.8% and the index for men’s and boy’s apparel was 2.2% higher…on the other hand, prices for transportation commodities other than fuel were down 1.2%, as prices for used cars and trucks fell 3.0% while new vehicle prices slipped 0.1%…in addition, prices for medical care commodities were 0.1% lower as nonprescription drugs prices fell 0.8%, while the recreational commodities index fell 0.6% on 1.9% lower prices for televisions and 2.9% lower prices for recorded music and music subscriptions…however, the education and communication commodities index was 0.2% higher on a 1.1% increase in the index for personal computers and peripheral equipment…lastly, a separate price index for alcoholic beverages was 0.5% higher, while the price index for ‘other goods’ rose 0.1% on a 0.3% increase in prices for cigarettes…

Within core services, the price index for shelter rose 0.2% on a 0.2% increase in rents and a 0.2% increase in homeowner’s equivalent rent, while prices for lodging away from home at hotels and motels fell 1.2%, the sub-index for water, sewers and trash collection rose 0.1%, and other household operation costs were on average unchanged….the price index for medical care services was also up by 0.2%, as dental services rose 0.3% and health insurance rose 1.2%…meanwhile, the transportation services index was up by 0.5% as car and truck rentals rose 2.2% and airline fares rose 1.0%…at the same time, the recreation services index rose 0.7% as rentals for video discs and other media rose 1.7%, pet services rose 2.2% and the index for admissions rose 0.9%…..in addition, the index for education and communication services rose 0.1%, as the price index for elementary and high school tuition rose 0.4% and the index for delivery services rose 1.1%…lastly, the index for other personal services was up 0.1% as laundry and dry cleaning services rose 0.5%…among core line items, prices for televisions, which are now 18.6% cheaper than a year ago, the price index for audio equipment, which has fallen 14.3% over the past year, and the price index for toys, which is down by 10.0% since last September, have all seen prices fall by more than 10% over the past year, while prices for laundry equipment, which have risen 10.6% over the past year, and checking account and other bank services, which are up 10.0% from a year ago, have seen prices rise by a double digit magnitude over that span..

Producer Prices Rose 0.2% in September on Higher Margins for Transportation Services

The seasonally adjusted Producer Price Index (PPI) for final demand was 0.2% higher in September, as prices for finished wholesale goods were 0.1% lower, while margins of final services providers increased by 0.3%…that followed an August report that showed the producer price index 0.1% lower, with prices for finished wholesale goods unchanged, while margins of final services providers decreased by 0.1%, a July report that indicated the PPI was unchanged, with prices for finished wholesale goods up 0.1%, while margins of final services providers decreased by 0.1%, and a June report that indicated the PPI rose 0.3%, as prices for finished wholesale goods averaged 0.1% higher, while margins of final services providers increased by 0.4%….on an unadjusted basis, producer prices are still 2.8% higher than a year ago, albeit down from the year over year increase of 3.3% that was indicated by last month’s report…meanwhile, the core producer price index, which excludes food, energy and trade services, was up by 0.1% for the month, and is now 2.9% higher than in September a year ago…

As noted, the price index for final demand for goods, aka ‘finished goods’, was 0.1% lower in September, after being unchanged in August, rising by 0.1% in July, 0.1% in June and by 0.9% in May…the price index for wholesale energy was 0.8% lower in September after rising 0.4% in August, falling 0.5% in July, rising a revised 1.3% in June and a revised 3.7% in May, while the price index for wholesale foods fell 0.6%, and the index for final demand for core wholesale goods (excluding food and energy) was 0.2% higher….the largest wholesale energy price change was a 18.0% increase in the wholesale price for LP gas, but the index was lower nonetheless on a 3.5% decrease in wholesale prices for gasoline…the wholesale food price index, meanwhile, included a 13.9% decrease in wholesale prices for fresh eggs and an 6.1% decrease in wholesale prices for fresh and dry vegetables….among wholesale core goods, wholesale prices for light motor trucks rose 0.8%, wholesale prices for pharmaceutical preparations increased 0.7%, and wholesale prices for household appliances increased 1.3%…

At the same time, the index for final demand for services rose 0.3%, after falling 0.1% in August, 0.1% in July, rising 0.4% in June, 0.3% in May, 0.2% in April and 0.3% in March, as the August index for final demand for trade services rose 0.1%, the index for final demand for transportation and warehousing services rose 1.8%, and the core index for final demand for services less trade, transportation, and warehousing services rose 0.3%….among trade services, seasonally adjusted margins for lawn, garden, farm equipment, and supplies retailers rose 7.3%, margins for furnishings wholesalers rose 5.6%, and margins both for food and alcohol wholesalers and apparel wholesalers rose 3.2%… among transportation and warehousing services, margins for airline passenger services rose 5.5% and margins for rail transportation of freight and mail rose 1.4%…among the components of the core final demand for services index, the index for passenger car rental rose 5.6% while margins for deposit services (partial) rose 4.1%..

This report also showed the price index for intermediate processed goods was unchanged in September for the third month in a row, after rising a revised 0.8% in June, and a revised 1.2% in May….the price index for intermediate energy goods fell 0.2%, as refinery prices for gasoline fell 3.5% and producer prices for commercial natural gas fell 1.5%…prices for intermediate processed foods and feeds fell 1.4%, as the price index for processed poultry fell 4.9% and dairy prices fell 0.7%…meanwhile, the core price index for processed goods for intermediate demand less food and energy was 0.2% higher on a 1.9% increase in the index for primary basic organic chemicals and a 4.6% increase in the index for inedible fats and oils….prices for intermediate processed goods are still 5.8% higher than in September a year ago, now the 22nd consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016….

Meanwhile, the price index for intermediate unprocessed goods rose 1.7% in September, after falling 5.8% in August, rising 2.7% in July, falling a revised 1.6% in June, and rising a revised 2.2% in May….that was as the September price index for crude energy goods rose 4.7% as crude oil prices rose 8.7%, while the price index for unprocessed foodstuffs and feedstuffs rose 0.6%, as producer prices for slaughter cattle rose 2.4%, prices for slaughter hogs rose 2.8% and producer prices for raw milk rose 2.9%…at the same time, the index for core raw materials other than food and energy materials was 2.8% lower, as prices for iron and steel scrap fell 6.8% and prices for copper base scrap fell 5.3%…this raw materials index is now up by 4.3% from a year ago, up from the 2.9% year over year increase that we saw in August…

Lastly, the price index for services for intermediate demand rose 0.5% in September, after rising 0.1% in August, 0.2% in July, a revised 0.2% in June, and 0.3% in May…the price index for intermediate trade services was up 0.7%, as margins for intermediate food wholesalers rose 3.7% and margins for margins for machinery and equipment parts and supplies wholesalers rose 1.3%…the index for transportation and warehousing services for intermediate demand rose 1.0%, as the index for air transportation of passengers rose 5.6% and the index for non-postal air mail and package delivery services rose 1.3%…meanwhile, the core price index for intermediate services less trade, transportation, and warehousing was 0.3% higher, as the index for deposit services (partial) rose 4.1%, the index for accounting services (partial) rose 2.1%, and the index for internet advertising space sales, excluding ads sold by print publishers rose 4.1%….over the 12 months ended in September, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 3.3% higher than it was a year ago…  

August Wholesale Sales Up 0.8%, Wholesale Inventories Up 1.0% in Big Boost to Q3 GDP

The August report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $511.1 billion, up 0.8 percent (+/-0.4%) from the revised July level, and up 9.2 percent (±3.5 percent) from wholesale sales of August 2017… the July preliminary estimate was revised up to $506,874 million from the $505.6 billion in wholesale sales reported last month, which meant that the June to July change was revised from the preliminary estimate of virtually unchanged (±0.2 percent)* to up 0.2 percent (±0.4 percent)*…as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold….

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this August report estimated that wholesale inventories were valued at a seasonally adjusted $589.1 billion at month end, up 1.0 percent (+/-0.2%) from the revised July level,  5.3 percent (±3.7 percent) higher than in August a year ago, and the largest monthly increase since October 2013….July’s inventory value was revised from $636,341 million to $636.339 billion, which left the July to August percentage change unchanged at +0.6 percent (+/-0.4%)…

August wholesale inventories would be deflated with the appropriate sub-indices of the August producer price index, which showed that aggregate prices for finished goods were unchanged in August, that prices for intermediate processed goods were also unchanged, while prices for unprocessed goods were 5.8% lower….hence, the real August wholesale inventories were at least 1.0% higher than in July, which themselves increased from the end of the second quarter…since real 2nd quarter inventories were down by the most since the 4th quarter of 2009, any real inventory increases in the 3rd quarter will substantially boost 3rd quarter GDP…

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most picked from the aforementioned GGO posts, contact me…)      

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