The seasonally adjusted Producer Price Index (PPI) for Total Final Demand unexpectedly increased by 0.3% in November as prices for finished wholesale goods fell by 0.1%, while margins of final services providers were 0.5% higher.   This followed a October report that showed the overall PPI down 0.4%, with prices for finished goods down 0.4% while final demand for services was down 0.3%.  Producer prices remain 1.1% lower than they were a year ago, as the November increase was only the third in the last 12 months...

Aas noted, the index for final demand for goods, aka 'finished goods', fell by 0.1% in November after falling 0.4% in October, 1.2% in September and 0.6% in August, as the index for wholesale food prices was up 0.3% after back to back 0.8% decreases, as an 11.6% increase in wholesale prices for fresh fruit and a 10.8% increase in the wholesale price for fresh eggs offset lower wholesale prices for several other foods.  Meanwhile, the index for wholesale energy prices fell 0.6% as wholesale prices for home heating oil and distillates were down 5.2% and wholesale residential natural gas prices fell 3.1%.  Excluding food and energy, the index for final demand for wholesale core goods was 0.1% lower in November, as a 1.1% decrease in wholesale prices for industrial chemicals and a 1.0% increase in wholesale prices for sporting and athletic goods were the only core finished goods to see a price change greater than 1% for the month.

Meanwhile, the index for final demand for services rose by 0.5% in November after falling by 0.3% in October and 0.4% in September, as the index for final demand for trade services rose 1.2%, the index for final demand for transportation and warehousing services rose 0.3%, and the index for final demand for services less trade, transportation, and warehousing services was 0.1% higher.  Among trade services, seasonally adjusted margins for fuels and lubricants retailers were 8.7% higher, margins for flooring and floor coverings retailers were 7.1% higher, and margins for clothing, jewelry, footwear, and accessories retailers increased by 6.2%, while computer hardware, software, and supplies retailers saw their margins contract by 5.5%.  Among transportation and warehousing services, a 1.3% decrease in margins for air transportation of freight only partially offset an increase in margins for other transportation and warehousing services, while in the core final demand services, a 3.9% increase in margins for portfolio management and a 3.2% increase in margins on consumer loans were offset by a 3.9% decrease in margins for securities brokerage, dealing, investment advice, and related services and a 3.6% decrease in the profitability of mining services...

This report also showed the price index for processed goods for intermediate demand fell by 0.6% after a 0.4% decrease in October, as intermediate processed goods prices have now been down 14 out of the last 16 months and are 7.1% lower than in November a year ago.  All intermediate goods indices were down for the month, with prices for intermediate energy goods 1.7% lower, the index for processed foods and feeds 0.4% lower, while the price index for processed goods for intermediate demand less food and energy was down 0.4%.  Meanwhile, the price index for intermediate unprocessed goods fell 5.1% in November after being unchanged in October and falling 3.1% in September and 4.4% in August, as all of the raw material indexes also fell, with the index for crude energy goods down 9.2%, the index for unprocessed foodstuffs and feedstuffs down 3.0%, and producer prices for raw materials other than food and energy materials 3.4% lower.  This raw materials index is now 26.6% lower than it was a year ago, as commodity prices continue to hit 16 year lows.

Finally, the price index for services for intermediate demand was unchanged in November after falling by 0.4% in October and 0.7% in September, as a 0.1% decrease in the index for trade services for intermediate demand offset a 0.2% increase in the index for transportation and warehousing services for intermediate demand and a 0.1% increase in the the price index for services less trade, transportation, and warehousing for intermediate demand.  Within such intermediate services, an 0.8% increase in margins for intermediate courier, messenger, and postal services offset a 3.7% decrease in margins for intermediate paper and plastics products wholesalers.  Over the 12 months ended in November, the year over year price index for services for intermediate demand, which has never turned negative, is still 0.5% higher than it was a year ago...  

A Note on Revisions to Import Prices

In addition to producer prices, this week also saw the Import and Export Price Indexes for November from the BLS, which indicated import prices declined 0.4% and export prices declined 0.6%, price changes that will be used to adjust November trade figures for deflation when they're released the first week of January next year.  However, with this release, the decrease in import prices for October was revised from -0.5% to -0.3%, while the decrease in import prices for September was revised from -0.6% to -1.1%.   These price revisions will have the effect of decreasing real imports for October by ~0.2% from the previously published amount, and increasing real imports for September by ~0.5% in their inclusion in 3rd quarter GDP.  Thus we'll revise our estimates of the economic impact of the October international trade report to indicate that our deteriorating balance of trade in goods in October will subtract about 0.40 percentage points from the growth of 4th quarter GDP, while the revision to 3rd quarter trade data combined with the change in September prices will subtract 0.10 percentage points from the previously published Q3 GDP figures.