Rising producer prices in 1999 dominated by energy goods (EXCERPT), Monthly Labor Review Online, August 2000

Rising producer prices in 1999 dominated by energy goods

Eleni Xenofondos and William F. Snyders

The Producer Price Index (PPI) for crude, intermediate, and finished goods rose in 1999; surging energy prices were the driving force behind the acceleration in each stage of process. The Producer Price Index for Finished Goods rose 2.9 percent in 1999, after showing no change in 1998, and falling 1.2 percent in 1997. The rise in 1999 was the largest annual increase since 1990’s 5.7-percent advance. The turnaround in overall finished goods was primarily due to soaring energy prices, which increased 18.1 percent, following an 11.7-percent decrease during the previous 12 months. The index for finished consumer foods rose 0.8 percent in 1999, after a slight 0.1-percent increase in 1998. However, finished goods other than foods and energy—a category that includes both consumer goods and capital equipment—increased 0.9 percent in 1999, after gaining 2.5 percent a year earlier. (See table 1.)

At the earlier stages of processing, the Producer Price Index for intermediate materials, supplies, and components rose 3.7 percent, following a 3.3-percent decline in 1998. This index captures price movements for goods such as jet fuel, paint materials, shipping containers, animal feeds, and semiconductors. The overall acceleration in intermediate materials was primarily due to rising prices for intermediate energy goods, which declined in 1998. Also contributing to the acceleration were rising prices for both nondurable and durable manufacturing materials, both of which fell last year. The index for materials and components for construction rose more than in the prior year. Prices for intermediate foods and feeds decreased less than in 1998. The intermediate core index (which excludes foods and energy) increased 1.9 percent, following a 1.6-percent decline in 1998.

Similarly, prices for crude materials for further processing advanced 15.3 percent in 1999, after falling 16.7 percent in 1998. Crude goods include commodities such as wheat, slaughter cattle, crude petroleum, natural gas, scrap metals, timber, and raw cotton. Analogous to finished and intermediate goods, most of the increase in crude goods can be attributed to rising prices for energy goods, which dropped in the previous year. Prices for crude goods other than foods and energy also increased substantially from last year. The index for crude foodstuffs and feedstuffs fell less than it did in 1998.

Inflation, as measured by the Consumer Price Index (CPI), rose 2.7 percent during 1999, accelerating from the 1.6-percent increase in 1998. As with the PPI, much of the CPI’s overall increase can be attributed to rising energy prices—gasoline prices paid by consumers rose 30.1 percent in 1999. However, excluding food and energy goods, consumer prices advanced only 1.9 percent, the slowest annual rate of increase in nearly 35 years.¹

This excerpt is from an article published in the August 2000 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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Footnotes
1 For details, see Todd Wilson, "Core consumer prices in 1999; low by historical standards," Monthly Labor Review, April 2000, pp. 3-5.

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