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July/August 2007, Vol. 130, No. 7

Price highlights, 2006: energy goods retreat, moderating producer prices

Michael L. Dolfman, Solidelle Fortier Wasser, and Bruce Bergman

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.

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