PPI for Final Demand Decreases 1.3% in April; Goods Fall 3.3%, Services Decline 0.2%

The Producer Price Index for final demand declined 1.3% in April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This decrease is the largest since the index began in December 2009. Final demand prices fell 0.2% in March and 0.6% in February. On an unadjusted basis, the final demand index moved down 1.2% for the 12 months ended in April, the largest decline since falling 1.3% for the 12 months ended November 2015.

In April, over 80% of the decrease in the final demand index can be traced to a 3.3% drop in prices for final demand goods. The index for final demand services moved down 0.2%.

Prices for final demand less foods, energy, and trade services fell 0.9% in April, the largest decline since the index was introduced in September 2013. For the 12 months ended in April, the index for final demand less foods, energy, and trade services moved down 0.3%, the first 12-month decrease.

Final Demand

Final demand goods: The index for final demand goods fell 3.3% in April, the largest decline since the series began in December 2009. Most of the broad-based decrease is attributable to prices for final demand energy, which fell 19.0%. The indexes for final demand goods less foods and energy and for final demand foods moved down 0.4% and 0.5%, respectively.

Product detail: Two-thirds of the April decrease in the index for final demand goods can be traced to prices for gasoline, which dropped 56.6%. This is the largest decrease since the series began in February 1947. The indexes for jet fuel, diesel fuel, basic organic chemicals, home heating oil, and corn also moved lower. In contrast, prices for beef and veal rose 12.6%. The indexes for distilled and bottled liquor (excluding brandy) and for electric power also increased.

Final demand services: The index for final demand services fell 0.2% in April following a 0.2% advance in March. Leading the decrease, prices for final demand services less trade, transportation, and warehousing moved down 0.9%. The index for final demand transportation and warehousing services declined 3.5%. Conversely, margins for final demand trade services increased 1.6%. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: Leading the April decline in the index for final demand services, prices for portfolio management fell 12.0%. The indexes for airline passenger services; traveler accommodation services; services related to securities brokerage and dealing (partial); hospital outpatient care; and apparel, footwear, and accessories retailing also moved lower. In contrast, margins for automotive fuels and lubricants retailing rose 41.6%. The indexes for inpatient care and for chemicals and allied products wholesaling also advanced.

Intermediate Demand by Commodity Type

Within intermediate demand in April, prices for processed goods fell 3.7%, the index for unprocessed goods dropped 13.7%, and prices for services declined 1.6%.

Processed goods for intermediate demand: The index for processed goods for intermediate demand declined 3.7% in April, the largest drop since falling 4.1% in December 2008. Seventy percent of the broadbased April decrease can be attributed to prices for processed energy goods, which fell 15.1%. The indexes for processed materials less foods and energy and for processed foods and feeds moved down 1.5% and 0.1%, respectively. For the 12 months ended in April, prices for processed goods for intermediate demand declined 7.3%, the largest decrease since a 7.7% drop in the 12 months ended October 2015.

Product Detail: A major factor in the April decrease in prices for processed goods for intermediate demand was the index for diesel fuel, which dropped 27.8%. Prices for gasoline, basic organic chemicals, jet fuel, residual fuels, and plastic resins and materials also moved lower. Conversely, the index for beef and veal jumped 12.6%. Prices for industrial electric power, and for distilled and bottled liquor (except brandy) also rose.

Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand moved down 13.7% in April, the largest decline since falling 15.4% in October 2008. Sixty percent of the broad-based April decrease was the result of a 27.5% drop in prices for unprocessed energy materials. The indexes for unprocessed foodstuffs and feedstuffs and for unprocessed nonfood materials less energy also moved down, 9.7% and 4.3%, respectively. For the 12 months ended in April, prices for unprocessed goods for intermediate demand decreased 28.2%, the largest decline since dropping 31.7% in the 12 months ended September 2009.

Product Detail: Nearly half of the April decrease in the index for unprocessed goods for intermediate demand can be traced to a 48.9% drop in prices for crude petroleum. The indexes for slaughter chickens, natural gas, corn, iron and steel scrap, and slaughter barrows and gilts also moved lower. In contrast, prices for wastepaper jumped 50.4%. The indexes for slaughter cows and bulls and for wheat also advanced.

Services for intermediate demand: The index for services for intermediate demand moved down 1.6% in April, the largest decline since the index began December 2009. Leading the decrease, prices for services less trade, transportation, and warehousing for intermediate demand fell 2.0%. In addition, the index for transportation and warehousing services for intermediate demand moved down 1.4%, and margins for trade services for intermediate demand decreased 0.4%. For the 12 months ended in April, the index for services for intermediate demand declined 1.2%, the first 12-month decrease for this index.

Product Detail: Over a third of the April decrease in the index for services for intermediate demand can be traced to prices for portfolio management, which dropped 12.0%. The indexes for services related to securities brokerage and dealing (partial), business loans (partial), television advertising time sales, airline passenger services, and machinery and equipment parts and supplies wholesaling also fell. Conversely, margins for automotive fuels and lubricants retailing jumped 41.6%. Prices for temporary help services and for arrangement of freight and cargo transportation also increased.

Intermediate Demand by Production Flow

Stage 4 intermediate demand: The index for stage 4 intermediate demand fell 1.8% in April, the largest decrease since the index began in December 2009. Prices for total goods inputs to stage 4 intermediate demand moved down 1.9%, and the index for total services inputs declined 1.8%. (See table D.) Decreases in the indexes for diesel fuel, portfolio management, gasoline, business loans (partial), machinery and equipment parts and supplies wholesaling, and services related to securities brokerage and dealing (partial) outweighed increases in the indexes for gross rents for retail properties, beef and veal, and chemicals and allied products wholesaling. For the 12 months ended in April, prices for stage 4 intermediate demand declined a record 1.9%.
 
Stage 3 intermediate demand: The index for stage 3 intermediate demand decreased a record 5.1% in April. Prices for total goods inputs to stage 3 intermediate demand dropped 9.7%, and the index for total services inputs moved down 1.1%. Falling prices for gasoline, jet fuel, slaughter chickens, diesel fuel, basic organic chemicals, and services related to securities brokerage and dealing (partial) outweighed increases in the indexes for automotive fuels and lubricants retailing, slaughter cows and bulls, and chemicals and allied products wholesaling. For the 12 months ended in April, prices for stage 3 intermediate demand declined 8.6%, the largest 12-month drop since the index entered calculation in December 2009.

Stage 2 intermediate demand: Prices for stage 2 intermediate demand declined 4.7% in April, the largest decrease since the index entered calculation in December 2009. Prices for total goods inputs to stage 2 intermediate demand dropped 9.5%, and the index for total services inputs moved down 1.7%. Falling prices for crude petroleum, natural gas, portfolio management, services related to securities brokerage and dealing (partial), basic organic chemicals, and television advertising time sales outweighed increases in the indexes for temporary help services, automotive fuels and lubricants retailing, and wastepaper. For the 12 months ended in April, prices for stage 2 intermediate demand declined 10.3%, the largest decrease since a 12.0% drop in the 12 months ended September 2015.

Stage 1 intermediate demand: The index for stage 1 intermediate demand fell 4.6% in April, the largest decrease since the index began in December 2009. Prices for total goods inputs to stage 1 intermediate demand declined 6.9%, and the index for total services inputs moved down 1.8%. Falling prices for diesel fuel, basic organic chemicals, gasoline, iron and steel scrap, crude petroleum, and business loans (partial) outweighed increases in the indexes for wastepaper, automotive fuels and lubricants retailing, and chemicals and allied products wholesaling. For the 12 months ended in April, prices for stage 1 intermediate demand declined 8.8%, the largest decrease since dropping 9.4% in the 12 months ended October 2015.