Academic journal article Monthly Labor Review

Price Highlights, 2006: Energy Goods Retreat, Moderating Producer Prices

Academic journal article Monthly Labor Review

Price Highlights, 2006: Energy Goods Retreat, Moderating Producer Prices

Article excerpt

Prices for energy goods turned downward in 2006--their first annual decline since 2001--resulting in smaller overall increases in the indexes for finished goods and intermediate goods and in a downturn in the crude goods index.

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The Producer Price Index (PPI) for Finished Goods advanced 1.1 percent in 2006, after rising 5.4 percent in 2005 and 4.2 percent in 2004. Finished goods are commodities that are ready for sale to final-demand users, either as durable or nondurable goods for consumers or as capital equipment for business firms. The index for intermediate materials, supplies, and components, reflecting the prices of goods produced at an earlier stage of processing, increased 2.8 percent in 2006, after climbing 8.6 percent in 2005 and 9.2 percent in 2004. Intermediate goods consist of material and component inputs to manufacturing and construction, as well as supplies for all types of businesses. The index for crude materials for further processing, reflecting the prices of goods produced at a still earlier stage of processing, moved down 4.7 percent in 2006, after climbing 21.1 percent in 2005 and 17.4 percent in 2004. Crude materials are unprocessed goods or raw materials. The smaller advances in 2006 for the indexes for finished goods and intermediate goods were the lowest over-the-year changes since 2001, while the decrease in prices of crude goods was the first in 5 years. (See table 1.)

Prices for energy goods turned downward in 2006, leading the deceleration for finished and intermediate goods, as well as the downturn for crude materials. The indexes for wellhead natural gas and utility natural gas fell in 2006, after having risen a year earlier, while prices for crude petroleum, coal, utility electric power, and refined petroleum products increased less than they did in 2005. Within finished goods, the index for finished energy goods moved down 2.0 percent in 2006, following a 23.9-percent advance a year earlier. Similarly, prices for intermediate energy goods fell 3.3 percent, after climbing 26.2 percent in 2005. The index for crude energy materials dropped 15.7 percent, compared with a 42.2-percent jump a year earlier, fully accounting for the 2006 downturn in the prices of crude goods.

In contrast, the index for finished goods other than foods and energy rose more in 2006 than in 2005--2.0 percent and 1.4 percent, respectively. The index for intermediate goods other than foods and energy moved up at nearly the same rate in 2006 as it had a year earlier: 4.5 percent, compared with 4.8 percent. At the same time, prices for crude nonfood materials less energy increased 17.0 percent, after rising 5.2 percent in 2005. (1) As regards foods at different stages of processing, the index for finished consumer foods moved up 1.7 percent in 2006, the same rate it had increased the previous year, while prices for intermediate foods and feeds and for crude foodstuffs and feedstuffs advanced more in 2006 than in 2005.

Energy goods

The indexes for energy goods at all three stages of processing declined in 2006, after having risen a year earlier. The index for finished energy goods decreased 2.0 percent, after surging 23.9 percent in 2005. Among finished energy goods, residential natural gas and liquefied petroleum gas saw their prices turn downward, following advances the previous year. The index for intermediate energy goods declined 3.3 percent, after having advanced 26.2 percent a year earlier. Within intermediate energy goods, prices for industrial natural gas, commercial natural gas, residual fuel, and natural gas to electric utilities turned downward, after rising in 2005. The index for crude energy materials dropped 15.7 percent in 2006, compared with a 42.2-percent jump in 2005. The index for wellhead natural gas turned downward, after having increased during the previous year, while prices for crude petroleum and coal rose less than they had a year earlier. …

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