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Producer Price Index Shows December Decline

Sorohan, Mike
The Producer Price Index for finished goods declined by 0.2 percent in December, the third consecutive drop, the Bureau of Labor Statistics reported yesterday.

Prices for finished goods fell by 0.8 percent in November and by 0.2 percent in October. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up by 0.3 percent, and the crude goods index increased by 2.5 percent. On an unadjusted basis, the finished goods index rose by 1.3 percent in 2012, compared to a 4.7-percent advance in 2011.

BLS said most of the decline in the finished goods index resulted from an 0.9-percent decrease in prices for finished consumer foods. The index for finished energy goods fell by 0.3 percent. Prices for finished goods less foods and energy inched up by 0.1 percent. 

“The primary driver throughout the fourth quarter has been the substantial decline registered in energy prices,” said Sam Bullard, senior economist with Wells Fargo Securities, Charlotte, N.C. “Over the past three months, energy prices have contracted at a 19.6 percent annual rate as global growth slowed in the second half of the year and prospects for 2013 remain restrained.”

Also yesterday, the Census Bureau reported advance estimates of U.S. retail and food services sales for December, rose to $415.7 billion, an increase of 0.5 percent from the previous month and 4.7 percent higher from a year ago. Total sales for the 12 months of 2012 rose by 5.2 percent from a year ago. Total sales for the October through December 2012 period rose by 4.2 percent from the same period a year ago.

Retail trade sales rose by 0.4 percent from November and by 4.4 percent from last year. Nonstore retailers were up 12.6 percent from December 2011 and miscellaneous store retailers rose by 9.9 percent from last year.

Eugenio Aleman, economist with Wells Fargo Securities, said consumers appeared to have shaken off fears over the “fiscal cliff.”

“It appears many shoppers looked through the gloom of the upcoming tax changes that were set to take effect, in January, with sales up 4.7 percent from a year earlier,” Aleman said. “A second month of falling gas prices left a little more room in shoppers’ pocket books.”

Also yesterday, the U.S. Census Bureau said the combined value of distributive trade sales and manufacturers’ shipments for November rose to $1,271.6 billion, up by1.0 percent from October and up by 4.3 percent from a year ago.

The report said manufacturers’ and trade inventories came in at an estimated end-of-month level of $1,621.5 billion, up by 0.3 percent from October and up by 5.5 percent from a year ago. The total business inventories/sales ratio based on seasonally adjusted data at the end of November was 1.28, compared to 1.26 a year ago.