Producer price inflation evident in government report

Purchasingdata.com information presages further PPI jump ahead

By Maria Varmazis -- Purchasing, 6/18/2008 11:57:00 AM

U.S. producer prices soared in May at their fastest pace in six months, according to a government report that finally is catching up with commodity price-increase indexes. Purchasingdata.com’s May index for raw materials is 31.4% higher than it was a year earlier, indicating that the BLS finished-goods index, a lagging indicator, will rise again in June.

The Bureau of Labor Statistics’ producer price index for finished goods rose 1.4% on a seasonally adjusted basis in May, the biggest rise since November. The Labor Department says the May index level is 7.2% higher than it was in May 2007. In May, the index for finished energy goods turned up 4.9%. The government’s core index, which excludes food and energy items, climbed 0.2% on the month and 3% from one year ago, matching the biggest annual increase since 1991.

Purchasingdata.com’s raw materials index increased 28.7% in April from the year-earlier month; in turn, the government’s intermediate energy goods producer price index climbed 6.2% in May. Diesel fuel prices jumped 11.2% in May while the price indexes for gasoline and residual fuels, home heating oil, commercial electric power, utility natural gas, industrial electric power and liquefied petroleum gas also turned up. “Pipeline price pressures are getting worse and are now more significant than at any other time this decade,” says Aaron Smith, senior economist at Moody’s.

Based on the latest government information, prices for materials for durable manufacturing climbed 4.5% in May. The steel mill products index advanced 10.7% while prices for primary nonferrous metals, nonferrous wire and cable, refined lead, building paper and board and cement turned up in May. The index for unfinished softwood lumber increased more than it had in the preceding month. By contrast, prices for aluminum mill shapes inched down 0.1% in May while the index for secondary aluminum rose less than it had in April.

The index for materials for nondurable manufacturing increased 3.2% in May while prices for primary basic organic chemicals climbed 7.5%. The indexes for plastic resins and materials, nitrogenates, newsprint, alkalies and chlorine and for writing and printing papers also increased more than they had in April; the rise in prices for phosphates rose to 5.4% in May. The indexes for intermediate basic organic chemicals and for processed yarns and threads also rose less than they had in April.