US Producer Price Indexes – January 2016

The Producer Price Index for final demand advanced 0.1 percent in January, seasonally adjusted,
the U.S. Bureau of Labor Statistics reported today. Final demand prices decreased 0.2 percent in
December and advanced 0.4 percent in November. On an unadjusted basis, the final demand
index declined 0.2 percent for the 12 months ended in January. (See table A.)

The increase in the final demand index for January can be traced to a 0.5-percent advance in
prices for final demand services. In contrast, the index for final demand goods moved down 0.7
percent.

In January, the index for final demand less foods, energy, and trade services advanced 0.2
percent for the second consecutive month. For the 12 months ended in January, prices for final
demand less foods, energy, and trade services climbed 0.8 percent.

Final Demand

Final demand services: The index for final demand services advanced 0.5 percent in January, the
third consecutive rise. Leading the broad-based increase in January, margins for final demand trade
services moved up 0.9 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) The indexes for both final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services rose 0.4 percent.

Product detail: Nearly half of the January increase in prices for final demand services is attributable
to a 4.0-percent advance in margins for machinery and equipment wholesaling. The indexes for
services related to securities brokerage and dealing; loan services (partial); apparel, footwear, and
accessories retailing; fuels and lubricants retailing; and airline passenger services also moved higher.
Conversely, margins for food and alcohol retailing declined 4.1 percent. The indexes for health,
beauty, and optical goods retailing and for physician care also decreased. (See table 4.)

Final demand goods: Prices for final demand goods fell 0.7 percent in January for the second
consecutive month. In January, the decrease in the index for final demand goods can be traced to
prices for final demand energy goods, which fell 5.0 percent. In contrast, the index for final demand
foods advanced 1.0 percent. Prices for final demand goods less foods and energy were unchanged.

Product detail: Over half of the January decrease in prices for final demand goods can be attributed
to the gasoline index, which fell 8.8 percent. Prices for home heating oil, electric power, jet fuel,
basic organic chemicals, and corn also moved lower. Conversely, the indexes for fresh and dry
vegetables jumped 17.3 percent. Prices for pharmaceutical preparations and residential natural gas
also increased.

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell