Producer Price Indexes of Sheet Steel, Aluminum, Plastic and Transportation

On Wednesday this week the Bureau of Labor Statistics (BLS) released its series of Producer Price Indexes (PPI) for more than 10,000 goods and materials. For an explanation of this program see the end of this piece. The latest release this week reported results through May. We run this analysis every three or four months to give readers an opportunity to become aware of any changes in the competitive position of steel against other materials and rail vs truck transportation. The PPI data are helpful in monitoring the price direction of steel and steel products against competing materials and products. As far as we at SMU can tell from comparison with known transaction prices, these PPI are a reasonable representation of the real world though there may be a lag between what the BLS reports and spot prices for steel products. We have also concluded that the actual index values of the PPIs of different products cannot be compared with one another because they are developed by different committees within the BLS. We believe that this data is useful in comparing the direction of prices in the short and medium term but not the absolute value.

The May report from the BLS read as follows: The Producer Price Index for final demand increased 0.4 percent in May, seasonally adjusted. Final demand prices rose 0.2 percent in April and declined 0.1 percent in March. On an unadjusted basis, the final demand index inched down 0.1 percent for the 12 months ended in May. In May, over 60 percent of the advance in the final demand index can be traced to prices for final demand goods, which climbed 0.7 percent. The index for final demand services moved up 0.2 percent. Prices for final demand less foods, energy, and trade services edged down 0.1 percent in May after rising 0.3 percent in April. For the 12 months ended in May, the index for final demand less foods, energy, and trade services increased 0.8 percent.