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-Editorial
Prices for wholesale goods and services fell sharply in December, providing another sign that inflation, while still high, is beginning to ease.
The Producer Price Index for final demand declined 0.5 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported. Final demand prices advanced 0.2 percent in November and 0.4 percent in October. On an unadjusted basis, the index for final demand increased by 6.2 percent in 2022 after rising 10.0 percent in 2021.
In December, the decrease in the final demand index can be attributed to a 1.6-percent decline in prices for final demand goods. In contrast, the index for final demand services rose 0.1 percent.
Prices for final demand fewer foods, energy, and trade services edged up 0.1 percent in December after increasing 0.3 percent in November. The index for final demand for fewer foods, energy, and trade services advanced by 4.6 percent in 2022 following a 7.0-percent rise in 2021.
Prices for final demand goods moved down 1.6 percent in December, the largest decrease since falling 1.8 percent in July. Leading the December decline, the index for final demand energy dropped 7.9 percent. Prices for final-demand foods decreased by 1.2 percent. Conversely, the index for final demand goods fewer foods, and energy advanced by 0.2 percent.
Nearly half of the December decrease in the index for final demand goods can be traced to a 13.4-percent decline in gasoline prices. The indexes for diesel fuel; jet fuel; fresh and dry vegetables; canned, cooked, smoked, or prepared poultry; and basic organic chemicals also fell. In contrast, prices for carbon steel scrap increased by 8.3 percent. The indexes for chicken eggs and electric power also moved higher.
Prices for final demand services edged up 0.1 percent in December after rising 0.2 percent in November.
The December increase can be traced to margins for final demand trade services, which advanced 0.3 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, the index for final demand transportation and warehousing services fell 0.2 percent, while prices for final demand services less trade, transportation, and warehousing were unchanged.
A major factor in the December increase in prices for final demand services was a 17.6- percent jump in margins for fuels and lubricants retailing.
The indexes for deposit services (partial), airline passenger services, inpatient care, and professional and commercial equipment wholesaling also moved higher. In contrast, prices for truck transportation of freight decreased by 1.7 percent. The indexes for residential real estate loans (partial), machinery and vehicle wholesaling, and guestroom rental also fell.
Within intermediate demand in December, prices for processed goods decreased by 2.8 percent, the index for unprocessed goods rose by 3.4 percent, and prices for services increased by 0.4 percent.
The index for processed goods for intermediate demand moved down 2.8 percent in December, the largest decline since falling 3.4 percent in April 2020. Over 80 percent of the broad-based decrease in December is attributable to prices for processed energy goods, which dropped 10.9 percent. The indexes for processed materials fewer foods and energy and for processed foods and feeds also moved down, 0.5 percent and 0.8 percent, respectively. In 2022, prices for processed goods for intermediate demand increased by 4.7 percent after jumping 24.4 percent in 2021.
Nearly two-thirds of the December decline in the index for processed goods for intermediate demand can be traced to a 27.0-percent drop in prices for diesel fuel. The indexes for gasoline; basic organic chemicals; jet fuel; asphalt; and canned, cooked, smoked, or prepared poultry also moved lower. Conversely, prices for electric power advanced by 1.0 percent. The indexes for beef and veal and primary nonferrous metals also increased.
Prices for unprocessed goods for intermediate demand rose 3.4 percent in December following three consecutive declines. Leading the increase, the index for unprocessed energy materials advanced by 9.5 percent. Prices for unprocessed nonfood materials with less energy moved up 0.6 percent. In contrast, the index for unprocessed foodstuffs and feedstuffs fell by 1.5 percent. In 2022, prices for unprocessed goods for intermediate demand moved up 11.7 percent following a 40.0-percent jump in 2021.
A major factor in the increase in prices for unprocessed goods for intermediate demand was the index for natural gas, which surged 45.3 percent. Prices for ungraded chicken eggs, carbon steel scrap, hay and hayseeds, slaughter turkeys, and aluminum base scrap also moved up. Conversely, the index for grains declined by 5.9 percent. Prices for crude petroleum and raw cotton also decreased.
