The 2020 Mid-Year Economic Update_long

Core Inflation Jumps 0.6%, Wholesale Prices Fall

quarter of 2006 after surging at a 29.6-percent SAAR in the second quarter of 2006.

Crude goods
The Producer Price Index for Crude Materials for Further Processing fell 3.4% in September following a 2.2-percent increase in August. Prices for crude energy materials turned down after rising in the previous month. Conversely, the basic industrial materials index increased after declining in August.

Prices for crude energy materials dropped 8.4% in September following a 5.9-percent rise in the preceding month. Leading this downturn, natural gas prices fell 5.5% after climbing 15.7% in the previous month. The crude petroleum index dropped 13.3% following a 1.9-percent decrease in August. Alternatively, prices for coal advanced 0.2% after declining 1.4% in the prior month. During the third quarter of 2006, the crude energy materials index increased at a 7.2-percent SAAR after falling at a 10.3-percent SAAR in the second quarter of 2006.

The index for crude nonfood materials less energy advanced 1.0% after decreasing 2.8% in August. Iron and steel scrap prices rose 5.0% following a 14.7-percent drop in the previous month. Prices for aluminum base scrap also turned up in September following declines in the preceding month. Conversely, prices for nonferrous metal ores fell 5.3% after increasing 4.8% in August. The raw cotton index also turned down following an advance in the previous month. Prices for construction sand, gravel, and crushed stone and for wastepaper rose less in September than in August. The index for copper base scrap fell after remaining unchanged in the previous month, and the index for pulpwood was unchanged after increasing a month earlier. For the 3 months ended September 2006, the basic industrial materials index decreased at a 1.9-percent SAAR after rising at a 59.4-percent SAAR in the 3 months ended June 2006.

Net output price indexes for mining, manufacturing, and services industries
Mining. The Producer Price Index for the Net Output of Total Mining Industries turned down 7.4% in September after rising 4.7% in August. (Net output price indexes are not seasonally adjusted.) The index for the oil and gas extraction industry group declined 9.8% following a 6.2-percent gain in August. Prices received for copper ore and nickel ore mining, oil and gas well drilling, gold ore mining, and bituminous coal underground mining also turned down after increasing a month earlier. The industry index for phosphate rock mining fell more than in the previous month. By contrast, the index for bituminous coal and lignite surface mining increased 0.1% following a 1.5-percent decrease in August. Prices received for oil and gas operation support activities rose in September after remaining unchanged in the previous month.  For the 3 months ended September 2006, the Producer Price Index for the Net Output of Total Mining Industries advanced at a 7.7-percent annualized rate, compared to a 1.4-percent annualized rate of increase in the second quarter of 2006. In September, the Producer Price Index for Total Mining Industries was 206.5 (December 1984 = 100), 11.4% below its year-ago level.

Manufacturing. The Producer Price Index for the Net Output of Total Manufacturing Industries turned down 1.9% in September after rising 0.1% a month earlier. The industry group index for petroleum and coal products declined 16.2% after increasing 0.7% in August. Prices received by the plastics and rubber products and by the medical equipment and supplies industry groups also turned down after rising in the previous month. The industry group index for electrical equipment and appliances rose less than in August. Alternatively, the industry group index for transportation equipment increased 0.9% in September after falling 1.2% a month earlier. Prices received by the wood products and by the computer and electronic products industry groups also rose after August declines. The food industry group index rose more than in the prior month.  For the third quarter of 2006, the Producer Price Index for the Net Output of Total Manufacturing Industries fell at an annualized rate of 6.6%, compared with a 12.1-percent annualized rate of increase in the prior quarter. In September, the Producer Price Index for Total Manufacturing Industries was 156.8 (December 1984 = 100), 1.7% above its year-ago level.

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The Producer Price Index for Finished Goods fell 1.3% in September, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported. This decline followed increases of 0.1% in both August and July. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved down 1.4% in September after increasing 0.4% in the preceding month, and the crude goods index dropped 3.4% following a 2.2-percent gain in August.



Among finished goods in September, prices for energy goods declined 8.4% compared with a 0.3-percent increase in August. The finished consumer foods index rose 0.7% after advancing 1.4% in the prior month. By contrast, prices for finished goods other than foods and energy climbed 0.6% in September following a 0.4-percent decline in August.

During the third quarter of 2006, prices for finished goods decreased at a seasonally adjusted annual rate (SAAR) of 4.4% after moving up at a 6.4-percent SAAR during the second quarter of 2006. Excluding prices for foods and energy, the finished goods index edged down at a 0.3-percent SAAR for the 3 months ended September 2006 subsequent to rising at a 2.3-% SAAR for the 3 months ended June 2006. Among prices for raw and partially processed goods, the intermediate goods index fell at a 1.9-percent SAAR in the third quarter of 2006 after climbing at a 10.3-percent SAAR from March to June 2006. The crude goods index moved up at an 8.0-% SAAR for the 3 months ended September 2006 following a 6.4-percent rate of increase during the previous quarter.

Before seasonal adjustment, the Producer Price Index for Finished Goods decreased 1.1% in September to 160.3 (1982 = 100). From September 2005 to September 2006, prices for finished goods rose 0.9%. Over the same period, the index for finished goods other than foods and energy went up 1.2%, prices for finished consumer foods climbed 2.2%, and the finished energy goods index declined 1.8%. For the 12 months ended September 2006, intermediate goods prices advanced 4.7%, and the crude goods index decreased 7.8%.

Finished goods
The index for finished energy goods declined 8.4% in September following a 0.3-percent gain in August. Over half of this downturn was due to gasoline prices, which dropped 22.2% in September subsequent to a 2.2-percent decrease in the previous month. The indexes for home heating oil, liquefied petroleum gas, residential electric power, and diesel fuel turned down after rising in August. By contrast, the index for residential natural gas advanced 1.8% in September following a 1.6-percent increase in the prior month. During the third quarter of 2006, prices for finished energy goods fell at a 24.7-percent SAAR after moving up at a 22.3-percent SAAR during the second quarter of 2006.

Capital equipment prices increased 0.6% in September after falling 0.3% in August. The index for passenger cars moved up 2.8% following a 2.6-percent decline in the prior month. Prices for light motor trucks, communication and related equipment, commercial furniture, and for x-ray and electromedical equipment also turned up in September after declining a month earlier. By contrast, the civilian aircraft index was unchanged following a 0.4-percent gain in August. Prices for industrial material handling equipment advanced less in September than they had in the preceding month. The index for truck trailers turned down after increasing in August. For the 3 months ended September 2006, capital equipment prices rose at a 0.5-percent SAAR after climbing at a 2.5-percent SAAR for the 3 months ended June 2006.

Intermediate goods
The Producer Price Index for Intermediate Materials, Supplies, and Components decreased 1.4% in September following a 0.4-percent increase in August. Most of this downturn can be traced to prices for intermediate energy goods, which fell after rising in the prior month. The index for materials for nondurable manufacturing also turned down, while prices for materials and components for construction advanced less in September than they had a month earlier. Prices for materials for durable manufacturing increased more than they had in August. Excluding foods and energy, prices for intermediate goods edged up 0.1% in September after rising 0.4% in the preceding month.

The index for intermediate energy goods decreased 7.5% in September following a 0.7-percent advance in August. Diesel fuel prices dropped 22.3% after increasing 2.7% in the prior month. The indexes for jet fuel, home heating oil, liquefied petroleum gas, and residual fuel also moved down in September following advances a month earlier. Gasoline prices fell more than in August, while the indexes for industrial natural gas and natural gas to electric utilities increased less in September than they had in the previous month. Conversely, the index for commercial natural gas climbed 3.0 % in September compared with a 1.8-percent gain in August. Prices for commercial electric power decreased less than they had in the preceding month. (See table 2.) The intermediate energy goods index declined at a 24.8-percent SAAR during the third quarter of 2006 after advancing at an 18.2-percent SAAR during the second quarter of 2006.

The index for materials for nondurable manufacturing fell 1.5% in September following a 0.2-percent increase in August. Leading this downturn, prices for basic organic chemicals decreased 4.0% after rising 2.0% in the prior month. Prices for plastic resins and materials and for stemmed and redried tobacco were unchanged after rising in August, while the indexes for paperboard and paper increased less than in the previous month. By contrast, prices for nitrogenates climbed 4.5% in September following a 6.0-percent drop in the preceding month. The index for synthetic fibers also turned up after falling in August. Prices for materials for nondurable manufacturing declined at a 4.4-percent SAAR for the 3 months ended in September after moving up at a 10.8-percent SAAR for the 3 months ended in June.

The index for materials and components for construction rose 0.2% in September following a 0.4-percent increase in August. Prices for fabricated structural metal products were unchanged after climbing 1.0% in the prior month. The nonferrous wire and cable index moved up less in September than it had a month earlier. Prices for concrete products, gypsum products, paving mixtures and blocks, hardwood lumber, and plastic construction products turned down following advances in August. Conversely, the softwood lumber index moved up 0.7% in September after dropping 5.6% in the previous month. Prices for treated wood also turned up following declines in August.


 


The plywood index fell less in September than it had in the preceding month, while prices for steel mill products and for air conditioning and refrigeration equipment increased more than in the prior month. The index for materials and components for construction rose at a 5.2-percent SAAR in the third quarter of 2006 after advancing at a 7.8-percent SAAR in the second quarter of 2006.

The index for materials for durable manufacturing advanced 0.5% in September following a 0.4-percent gain in August. In September, rising prices for cold rolled steel sheet and strip; hot rolled steel sheet and strip; hot rolled steel bars, plates, and structural shapes; softwood lumber; prepared paint; and cement outweighed falling prices for aluminum mill shapes, primary aluminum (except extrusion billet), cold finished steel bars, building paper and board, and hardwood lumber. The index for materials for durable manufacturing increased at a 13.4-percent SAAR in the third

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