Price acceleration was evident throughout the producer price index report Tuesday, particularly within core items where vehicles, power generating equipment, and pharmaceuticals combined with a host of other categories to post a 0.7% increase, far above expectations.
The Bureau of Labor Statistics reported the core rate’s increase — the largest since November 2006 — was less before seasonal adjustment, up 0.5%. Without counting cars and trucks the core would have been up just 0.1 less.
Although the core’s big movers were vehicle prices, power turbine costs, and drug prices, not far behind were aircraft, communications equipment, and plastic products.
The overall PPI’s finished goods index was less of a surprise but still double expectations, up 1.2%. That was less than in each of the previous two months.
Gasoline prices after adjustment were off 0.2% with the PPI pricing date just after the peak. Since then gasoline prices have kept tapering. But almost all other energy categories were up, taking the overall energy index up 3.1% for the month.
Earlier in the supply pipeline the stiff price increases were just as evident, with raw materials prices up 4.2% in July and intermediate goods prices up 2.7%.
Drilling down farther, core raw materials prices also surged, up 3.4%, led by iron and steel scrap’s 5.2% jump. Over a year iron and steel scrap prices are up in triple digits, 110.5% through July.
At the intermediate core level, price acceleration was strongest in organic chemicals and plastic resins.
Year to date, the overall PPI is running at an annualized rate of 12.8%, nearly double the rate last year at the same point, 6.9%. The core rate’s 5.0% year-to-date rate is more than double the 2.3% rate last year in July.
Expectations in a Market News International survey of economists centered on a 0.6% increase in the PPI’s finished goods index and a 0.2% increase in the July core rate.
— Market News International