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William D. Thomas
Prices received by domestic producers of finished goods fell 1.2 percent in 1997, following a 2.8-percent rise in 1996 and a 2.3-percent advance in 1995. The last calendar-year decline for finished goods was in 1986, when the index dropped 2.3 percent due to falling energy prices. The index for finished energy goods moved down 6.4 percent from December 1996 to December 1997, after an increase of 11.7 percent a year earlier. Prices for foods, such as pork and fresh fruits and melons, fell 0.8 percent in 1997, following a 3.4-percent increase in 1996. However, prices for finished goods other than foods and energy, a category that includes consumer goods such as passenger cars and apparel, were unchanged in 1997, after a 0.6-percent rise in 1996. (See table 1.)
At the earlier stages of processing, the directions in price changes for intermediate goods were the same as those for crude goods. The index for intermediate goods declined 0.8 percent in 1997, after a 0.7-percent rise in 1996. This index measures the price movements of goods such as flour, steel, lumber, industrial chemicals, diesel fuel, and paper boxes. Prices for crude goods fell 11.3 percent in 1997 after rising 14.7 percent in 1996. Crude goods include wheat, scrap metals, logs, crude petroleum, and cotton. Prices for food-related materials at the intermediate stage of processing also fell from 1996 to 1997; at the crude level, price declines accelerated for foodstuffs and feedstuffs. However, when the effects of price changes for energy and food-related materials are excluded, the core indexes for both intermediate and crude goods turned up somewhat in 1997 after decreasing in 1996.
This excerpt is from an article published in the July 1998 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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