Long Term Perspective

Prices will increase or decrease at earlier stages of production before consumers pay more (less) for finished goods. Changes in prices of food and energy products tend to overshadow changes in prices of other goods. From 2003 and through mid-2006, intermediate goods price gains were at strong year-on-year rates not seen since the early 1980s. After a brief softening during late 2006 and early 2007, intermediate PPIs ran up even more sharply over the late 2007 through mid-2008 period. During late 2008 and first half 2009, the recession and lower oil prices turned this index negative.  The price of crude oil has been volatile over the last two years.  In 2010 and early 2011, higher oil and other commodity prices started to cause prices to accelerate at the crude and intermediate levels.  Oil and other commodity prices eased somewhat at mid-2011.  However, they firmed notably in latter 2011, only to soften in 2012.

Short Term Perspective

Strong world-wide demand caused oil and other prices to surge in 2007 and into the first half of 2008.  But oil prices peaked in July 2008 and then declined through year end.  Recession in the U.S. and in other countries had softened demand for crude and intermediate goods but in 2009 improved growth in many economies bumped oil prices up somewhat.  For the overall crude PPI, the year-ago pace recently peaked at 48.8 percent in July 2008.  During 2011, crude oil prices swung significantly, rising early in the year, dipping mid-year, and firming again during most of latter in the year.  Other commodities prices on average were up significantly early in 2011 but eased during the second half.  After firming in early 2011, inflation rates softened late in the year and well into 2012 on a year-ago basis.  The overall intermediate PPI year-on-year firmed to plus 0.8 percent in October, compared to minus 0.1 percent the month before. The overall crude PPI in October rose to 0.0 from minus 2.6 the prior month.