PPI decline biggest in 3 year, Industrial production down 0.6%

The Labor Department reported that Producer Price Index (PPI) fell 1.3% in September, the biggest decline in three years, while the core PPI, which excludes food and energy prices, climbed 0.6%. The PPI increased 0.1% and the core PPI declined 0.4% in August.

Among finished goods in September, prices for energy goods declined 8.4% compared with a 0.3% increase in August. The finished consumer foods index rose 0.7% after advancing 1.4% in the prior month. 


Industrial production decreased 0.6% in September after having been unchanged in August, reports the Federal Reserve. For the third quarter as a whole, industrial production rose at an annual rate of 3.6%, down from the rapid pace of gains in the previous three quarters. Nonetheless, production at the end of the quarter was about 5-1/2% above its year-earlier level. Output in the manufacturing sector declined 0.3 percent in September, a decrease that slightly more than reversed its upwardly revised gain of 0.2 percent in August. The output of utilities plunged 4.4 percent in September, while the output at mines expanded 0.7 percent.

Capacity utilization for total industry declined 0.6 percentage point, to 81.9%. Even so, this rate of capacity utilization was higher than the rates recorded from mid-2000 to early 2006.

Market Groups

The output of consumer goods fell 0.9 percent; the decrease was led by a weather-related pullback in the output of consumer energy products and by a drop of 1.8 percent in the output of consumer durables.  The output of business equipment slipped 0.2 percent in September. The production of industrial and other equipment fell 1.2 percent.  The output of construction supplies declined for a second month, to a level about the same as that of four months earlier. 

Industry Groups

Durable manufacturing production decreased 0.4 percent. The output of computer and electronic products increased 1.1 percent, and the output indexes for aerospace and miscellaneous transportation equipment and for miscellaneous manufacturing both posted gains of 0.5 percent. Nondurable manufacturing edged down 0.2 percent. 

In September, the manufacturing utilization rate declined 0.4 percentage point, to 80.8 percent, a rate that is 1 percentage point above its 1972-2005 average. 

Net Foreign Flows:

Treasury International Capital (TIC) data for August are released today and posted on the U.S. Treasury web site (www.treas.gov/tic).  Net foreign purchases of long-term securities were $116.8 billion.

  • Net foreign purchases of long-term domestic U.S. securities were $119.5 billion.  Of this, net purchases by foreign official institutions were $30.1 billion and net purchases by private foreign investors were $89.4 billion.
  • U.S. residents purchased a net $2.7 billion in long-term foreign securities.

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