A pretty good combination. Not surprisingly, December's drop in producer prices was, as reported by the Bureau of Labor Statistics, led by a moderation in energy prices.
The Producer Price Index for Finished Goods fell 0.7 percent in December, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decline followed a 0.5-percent increase in November and a 1.7-percent advance in October. At the earlier stages of processing, prices received by producers of intermediate goods turned down 0.3 percent, after rising 0.8 percent in the previous month, and the crude goods index declined 2.9 percent in December, following an 8.7-percent increase in November...
Among finished goods, prices for energy goods dropped 4.0 percent in December, as opposed to the 1.8-percent increase registered in November. (Excluding energy, prices for finished goods rose 0.1 percent in December.)
That's a nice finish to a year that saw a sizable jump in PPI inflation.
From December 2003 to December 2004, finished goods prices increased 4.1 percent, after climbing 4.0 percent during 2003. Prices for finished goods other than foods and energy gained 2.2 percent in 2004, following a 1.0-percent rise in 2003. Prices for finished energy goods advanced 13.4 percent in 2004, compared with an 11.4-percent increase in the previous year. By contrast, the finished consumer foods index moved up 2.8 percent in 2004, following a 7.7-percent advance in the prior year. At the earlier stages of processing, the intermediate goods index jumped 9.1 percent from December 2003 to December 2004, after registering a 3.9-percent gain during 2003. Prices received by producers of crude materials for further processing increased 18.0 percent in 2004, following a 19.5-percent rise in the prior year.
As producer prices were falling, the pace of industrial production in December was accelerating. So reports the Federal Reserve.
Industrial production increased 0.8 percent in December after gains of 0.2 percent in November and 0.8 percent in October. In the manufacturing sector, output rose 0.7 percent in December, and increases occurred in most major industry groups... Over the twelve months ending in December, total industrial production increased 4.4 percent, to a level that is 117.8 percent of its 1997 average, while total industrial capacity expanded a modest 1.2 percent. The rate of capacity utilization in December, at 79.2 percent, was 2.4 percentage points above its year-earlier level but still 1.9 percentage points below its 1972-2003 average.