Current Price Trends

Intermediate Materials 

Continue their Advance 

1

Producer Price Index: First Quarter 2010

U.S. Bureau of Labor Statistics May 2010 Volume 1, Number 2

In the first quarter of 2010, the Producer 

Price Index for intermediate goods rose at a 

similar rate as in the fourth quarter of 2009. 

This advance reflected higher costs faced by 

the manufacturing and construction sectors 

for both materials and components, as well 

as increasing prices paid by various types of 

businesses for supplies such as fuels, lubricants, boxes, containers, plastic products, and 

drugs and pharmaceuticals. This first edition 

of the new “Focus” series on the PPI analyzes 

recent trends in the various Producer Price 

Indexes with a particularly detailed examination of intermediate goods. First, broad trends 

in producer prices and the overall economy 

are identified.

Economic Background

After registering steep declines through 

mid-2009, 12-month rates of change in Producer Price Indexes (PPIs) across all stages of 

processing reversed course over the period 

that has followed. In July 2009, the indexes for 

crude, intermediate, and finished goods were 

falling at 12-month rates of 44.8, 15.2, and 6.9 

percent, respectively.1 By March 2010, these 

indexes were rising at rates of 33.4, 7.7, and 

6.0 percent, respectively. This turnaround in 

producer prices can be traced, at least in part, 

to general improvement in the U.S. economy. 

Data relating to gross domestic product 

(GDP), exports, and industrial production 

show that the overall strength of the domestic 

economy has improved from its weakest point 

in early-to-mid-2009.

GDP figures from the Bureau of Economic 

Analysis of the U.S. Department of Commerce 

confirm that the U.S. economy was in deepest recession during the final quarter of 2008 

and the first quarter of 2009, when GDP fell 

at 5.4 percent and 6.4 percent seasonally 

adjusted annual rates (SAARs), respectively.2

A 2.7-percent drop in third quarter 2008 GDP 

and a 0.7-percent decrease during the second 

quarter of 2009 added to the severity of the 

downturn. By the latter half of 2009, however, 

the U.S. economy was once again expanding; GDP grew at a 2.2-percent SAAR in the 

third quarter of 2009 and a 5.6-percent SAAR 

during the final quarter of 2009.3

 This reversal 

in GDP was due to a large expansion in equipment and software fixed investment, private 

inventory investment, strong gains in exports 

of goods, and an upturn in personal consumption expenditures. By contrast, consumption 

and investment expenditures by government 

slowed in the latter part of 2009, and private 
fixed investment in structures continued to 

decline.4

Data published by the Federal Reserve System 

relating to industrial production also point 

to an upturn in economic activity since mid2009.5

 Overall industrial production fell 6.7 

percent in 2008 and declined at even steeper 

annual rates during the first two quarters of 

2009—19.0 and 10.4 percent. Over the final 

two quarters of 2009 and the first quarter of 

2010, industrial production turned upward, 

rising at 6.4-, 6.9-, and 7.8-percent SAARs. The 

improvement from mid-2009 forward was 

broad based; industrial production of both 

final products (consumer goods and business equipment) and materials for business 

advanced following earlier decreases.6

 In 

comparison, production of construction supplies—though slightly improved in the third 

quarter of 2009—showed significant weakness in the final quarter. In the first quarter of 

2010, more improvement was evident.7

Reflecting this overall improvement in the 

economy, PPIs across all stages of processing 

began advancing in mid-2009. Gains in prices 

for crude goods led the way, posting quarterly 

increases starting in the second quarter. By 

the close of the first quarter of 2010, however, 

the turnaround in prices for crude energy 

goods and crude foods began to level off, 

as prices for crude commodities tend to be 

sensitive to even subtle shifts in the economy, 

which often result in quick adjustments in 

prices. 

The indexes for intermediate energy goods

and intermediate foods and feeds exhibited 

price movements similar to those for their 

crude-good counterparts, but prices received 

by producers of intermediate goods less foods 

and energy (also known as intermediate core 

inflation) continued increasing at accelerating rates through March 2010. The strengthening in intermediate core inflation was 

widespread. Quarterly percent changes for 

the indexes for materials for both nondurable 

manufacturing and durable manufacturing, 

containers, and supplies to manufacturers all 

showed mounting advances through the first 

quarter of 2010. 

Intermediate Goods

Returning to the focus on the PPI for Intermediate Materials, Supplies, and Components, 

prices rose 2.4 percent, seasonally adjusted, 

for the 3 months ended March 2010, matching their rate of advance during the 3 months 

ended December 2009. (See chart 1.) The 

increase in first quarter 2010 can be traced 

to prices for intermediate goods less foods 

and energy, which climbed 2.2 percent, and 

the index for intermediate energy goods, 

which climbed 4.5 percent. In contrast, prices 

received by manufacturers of intermediate 

foods and feeds fell 1.2 percent during the 3 

months ended in March. 

The increase in the index for intermediate 

goods less foods and energy accelerated to 

2.2 percent during the first quarter of 2010 

from 0.9 percent in the final quarter of 2009. 

Within the intermediate goods “core,” prices 

for iron and steel had the greatest impact, 

jumping 14.1 percent in the 3 months ended 

2

 C U R R E N T P R I C E T O P I C S
3

March 2010 following a 0.1-percent advance 

in the previous quarter. The indexes for basic 

organic chemicals, thermoplastic resins and 

materials, and lumber also rose more than in 

the final quarter of 2009. The index for paperboard turned up in the first 3 months of 2010 

after decreasing in the fourth quarter of 2009. 

By contrast, from December 2009 to March 

2010, the index for primary nonferrous metals

declined 4.8 percent after a 6.2-percent rise 

in fourth quarter of 2009. Prices for copper 

and brass mill shapes also turned down in the 

first quarter of 2010, and the index for nonferrous wire and cable rose less than in the final 

quarter of 2009. 

As of March 2010, iron and steel prices were 

31.0 percent higher than at their 2009 lows. 

The automotive and industrial equipment 

manufacturing industries are two major consumers of steel in the United States. Driving 

demand for iron and steel production of motor vehicles turned up in July and advanced 

through September.8

 Increased demand for 

industrial equipment paralleled that of motor 

vehicles manufacturing, since such equipment is a major input to these industries. The 

more modest 0.1-percent increase in iron and 

steel prices in the fourth quarter of 2009 may 

have been attributable to weather-related 

halts in construction and the winding up of 

programs aiding motor vehicle and parts 

manufacturers. In the first quarter of 2010, 

prices for iron and steel jumped 14.1 percent 

due to inventory replenishment as the economy continued to strengthen, annual contract 

renegotiations with makers of metal-intensive 

processed goods, and a growing export market due to the weak U.S. dollar.9

In the 3-month period ending March 2010, the 

index for basic organic chemicals advanced 

 C U R R E N T P R I C E T O P I C S
9.6 percent following a 5.6-percent gain from 

September to December 2009. As industrial 

and consumer demand have continued to rebound, so have chemical prices. Chemicals are 

used in manufacturing most consumer products, in addition to being a major input to the 

automotive and construction industries, so 

the overall economy greatly influences prices. 

Federal Reserve data on manufacturing shows 

factory capacity utilization has grown since its 

recession low in mid-2009, resulting in increased demand for chemicals and the subsequent upturn in the basic organic chemicals 

index.10 On the cost side of pricing pressures 

for chemicals manufacturers were increases 

in the indexes for crude oil and natural gas. 

Crude oil and natural gas are key material inputs to organic chemicals both as raw materials and as an energy source for manufacturing 

operations. In the first quarter of 2010, prices 

for crude oil and natural gas rose 17.9 percent 

and 8.6 percent, respectively. 

The increase in the index for intermediate 

energy goods slowed to 4.5 percent in the first 

quarter of 2010, from 7.3 percent in the fourth 

quarter of 2009. Prices for gasoline advanced 

less, climbing 5.5 percent subsequent to a 

13.8-percent rise in the fourth quarter of 2009. 

The indexes for residual fuels, home heating 

oil, and diesel fuel also rose less during the 

first quarter of 2010 than they had in the previous quarter. Prices for both liquefied petroleum gas and industrial electric power declined in the first quarter of 2010 after rising 

in the preceding quarter. By contrast, the rise 

in the index for natural gas to electric utilities

accelerated to 9.4 percent after moving up 1.4 

percent in the final quarter of 2009. Prices for 

commercial electric power and lubricating oil 

materials advanced more than they had in the 

final quarter of 2009.

Prices for gasoline rose 5.5 percent in the 

3-month period ended March 2010 subsequent to a 13.8-percent advance in the 

3-month period ended December 2009. The 

worldwide economic rebound has driven 

economically sensitive energy prices higher. 

In early 2010, the International Energy Administration upped its global demand estimates 

for crude petroleum 1.9 percent to a record 

86.7 million barrels per day.11 The price of 

crude petroleum is the most important factor 

in determining gasoline prices, accounting for 

about 70 percent of gasoline’s cost to consumers.12 Abundant gasoline stocks, roughly 

5.5 percent above their 5-year average, helped 

mitigate the pricing pressure for gasoline in 

the first quarter of 2010. 

The index for liquefied petroleum gas (LPG) 

decreased 1.3 percent in the first quarter of 

2010 after surging 41.0 percent during the last 

quarter of 2009. LPG is used, primarily in rural 

areas, as a heating fuel and is derived from 

fossil fuel. Late in 2009, prices for LPG surged 

as colder weather across the Nation depleted 

LPG stocks. According to the Energy Information Administration, ending stocks of LPG 

declined from 146 million barrels in October 

2009 to 69 million barrels in March 2010.13

After peaking in January, prices for LPG declined substantially through March, as the end 

4

 C U R R E N T P R I C E T O P I C S
5

of winter heating season and the beginning 

of the traditional inventory rebuilding cycle 

approached.

The index for intermediate foods and feeds

turned down 1.2 percent in the first quarter of 

2010, following a 2.7-percent advance in the 

fourth quarter of 2009. Leading this downturn, the index for prepared animal feeds fell 

8.3 percent in the first quarter of 2010, subsequent to rising 3.9 percent in the preceding 

quarter. Prices for dairy products, young chickens, and confectionary materials also declined 

after moving up during the fourth quarter of 

2009. By contrast, the index for beef and veal

surged 10.5 percent following a 7.0-percent 

decrease in the previous quarter. Prices for 

unprocessed and packaged fish rose more 

during the first quarter of 2010 than they had 

during the previous quarter.

The 8.3-percent price decline in prepared 

animal feed prices during the first quarter of 

2010 is attributable to both weak demand 

for beef and smaller herds, which pressured 

farmers to accept prices that were lower than 

expected when production plans were implemented in 2009.14 Demand for beef fell as a 

result of the economic recession, high unemployment, and abundant supplies of pork and 

poultry.15 Also contributing to sliding animal 

feed prices, inputs such as corn and soybeans

experienced a sharp decline in prices, due to 

news that soybean and corn production will 

be near record levels for the 2009 and 2010 

growing season.16

The index for dairy products fell 2.4 percent in 

the first quarter of 2010, following a 9.7-percent advance in the fourth quarter of 2009. 

Contributing significantly to lower prices for 

dairy products, the indexes for natural, processed, and imitation cheese and for natural 

cheese (except cottage cheese) experienced 

sharp declines of 6.1 and 8.2 percent in the 

first quarter of 2010 after surging 11.6 and 

13.9 percent, respectively. Declining prices 

faced by dairy farmers in the first quarter of 

2010 were mainly due to greater milk supplies 

due to an increase in production yields and 

herd sizes.17 This increased production, coupled with weaker demand, created a surplus, 

which drove dairy prices lower in the opening 

quarter of 2010.18

The previous section of this analysis provided 

a detailed look at Producer Price Indexes for 

materials in the intermediate stage of processing. This section highlights price movements 

for goods in other stages of processing and 

the services sector.

Finished goods

The rate of increase in prices for finished 

goods slowed to 1.5 percent during the first 

quarter of 2010 compared with 2.3 percent 

in the final quarter of 2009. (See chart 2.) 

Leading the deceleration in finished goods 

prices, the index for energy goods advanced 

2.9 percent in the first quarter of 2010 after 

Current Price Trends

Other Producer 

Price Highlights

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6

climbing 8.3 percent in the preceding quarter. 

By contrast, prices for goods other than foods 

and energy inched up 0.5 percent following 

no change in the fourth quarter of 2009. The 

index for finished consumer foods rose 3.2 

percent in the first quarter of 2010, nearly 

matching its 3.3-percent advance in the previous quarter.

The index for finished energy goods moved 

up 2.9 percent in the first quarter of 2010 following an 8.3-percent jump during the fourth 

quarter of 2009. Price increases for gasoline

slowed to 5.5 percent in the first quarter of 

2010 from 13.8 percent in the prior quarter. 

The indexes for home heating oil and kerosene also rose less than they had in the final 

quarter of 2009. Prices for liquefied petroleum 

gas and residential electric power turned 

down in the first quarter of 2010 subsequent 

to advances in the preceding quarter. Conversely, the index for residential natural gas

increased 3.5 percent following a 0.1-percent 

decline in the final quarter of 2009. Prices for 

finished lubricants also turned up in the first 

quarter of 2010.

The index for finished goods less foods and 

energy edged up 0.5 percent during the first 

quarter of 2010 after no change in the fourth 

quarter of 2009. A 1.7-percent rise in first 

quarter prices for light motor trucks, following 

a 1.7-percent decline in the previous quarter, 

led the increase in finished core prices. The 

indexes for consumer plastic products, radio 

and television communication equipment, and 

sporting and athletic goods also turned up after falling in the final quarter of 2009. Civilian 

aircraft prices moved up at a faster rate in the 

first quarter of 2010 than they had in the prior 

quarter. Conversely, the index for cigarettes

advanced 1.0 percent following a 2.6-percent 

gain in the fourth quarter of 2009. Prices for 

pharmaceutical preparations also increased 

 C U R R E N T P R I C E T R E N D S
December 2009. (See chart 3.) The advance 

in prices for crude energy materials slowed to 

10.8 percent from 18.7 percent in the 3-month 

period ending in December. The index for 

crude foodstuffs and feedstuffs also rose 

less, advancing 5.2 percent from December 

to March after climbing 10.3 percent in the 

previous quarter. By contrast, the rise in the 

index for crude nonfood materials less energy

accelerated to 12.3 percent during the first 

quarter of 2010 from 5.8 percent in the final 

quarter of 2009.

The index for crude energy materials rose 10.8 

percent from December 2009 to March 2010 

compared with an 18.7-percent climb for 

the 3 months ended December 2009. Natural 

gas prices moved up 8.6 percent following a 56.0-percent jump in the preceding 

quarter, while the coal index turned down 

3.4 percent after rising 2.7 percent between 

September and December 2009. By contrast, 

 

 7

less in the first quarter than they had in the 

preceding quarter. The index for alcoholic 

beverages turned down in the first quarter 

of 2010, while the index for major appliances

decreased more than it had in the final quarter of 2009.

The index for finished consumer foods rose 

3.2 percent in the first quarter of 2010, roughly the same rate of advance as in the final 

quarter of 2009. In the first quarter of 2010, 

higher prices for fresh and dry vegetables, 

meats, finfish and shellfish, and soft drinks

outweighed lower prices for dairy products, 

cereal and bakery products, and processed 

young chickens.

Crude goods

The Producer Price Index for Crude Materials 

for Further Processing increased 9.2 percent 

in the 3 months ended March 2010 following a 12.4-percent climb from September to 

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8

crude petroleum prices advanced 17.9 percent 

in the first quarter of 2010 following a 1.6-percent increase in the fourth quarter of 2009.

The index for crude foodstuffs and feedstuffs

moved up 5.2 percent from December 2009 

to March 2010, subsequent to a 10.3-percent 

advance in the previous quarter. This slower 

rate of increase can be attributed mostly to 

fluid milk prices, which rose 4.2 percent in the 

first quarter following a 27.7-percent jump in 

the 3 months ended December 2009. Indexes for corn and oilseeds turned down in the 

first quarter of 2010, and prices for slaughter 

hogs and slaughter chickens advanced less 

than they had in the fourth quarter of 2009. 

In contrast, the index for slaughter cattle

turned up 15.7 percent in the first 3 months of 

2010, compared with a 3.9-percent decrease 

in the previous 3-month period. Prices for 

unprocessed shellfish, ungraded chicken eggs, 

unprocessed finfish, and slaughter lambs all increased more from December 2009 to March 

2010 than they had in the preceding 3-month 

period.

The advance in the index for crude nonfood 

materials less energy accelerated to 12.3 

percent for the 3 months ended March 2010 

from 5.8 percent for the 3 months ended December 2009. Wastepaper prices surged 60.6 

percent in the first quarter from 2.5 percent 

in the fourth quarter, while the index for iron 

and steel scrap climbed 36.2 percent from 

December to March after inching down in 

the prior 3 months. For the 3 months ended 

March 2010, prices for hides and skins, pulpwood, and phosphates rose more than they 

had in the final quarter of 2009. By contrast, 

in the first quarter of 2010, the index for 

copper ores declined 5.5 percent subsequent 

to rising 14.5 percent from September to 

December. Prices for gold ores also turned 

down, while the index for aluminum base 

scrap increased less than it had in the 3 

months ended December 2009.

Trade industries

The Producer Price Index for the Net Output 

of Total Trade Industries moved up 2.6 percent 

in the first quarter of 2010 after edging up 

0.1 percent in the last quarter of 2009. (Trade 

industry PPIs measure changes in margins 

received by wholesalers and retailers.) Leading this acceleration, margins received by 

merchant wholesalers of nondurable goods

climbed 8.7 percent in the 3-month period 

ending in March subsequent to a 2.0-percent 

decline from September to December 2009. 

The margin indexes for merchant wholesalers 

of durable goods, supermarkets, and automotive parts and accessories stores also turned 

up in the first quarter of 2010. By contrast, 

the margin index for gasoline stations with 

convenience stores dropped 22.5 percent in 

the first 3 months of 2010 compared with 

a 22.1-percent gain in the last 3 months of 

2009. Margins received by home centers also 

turned down in the first quarter of 2010. The 

discount department stores margin index 

advanced less than it had in the preceding 

3-month period. 

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9

Transportation and warehousing industries

The Producer Price Index for the Net Output 

of Transportation and Warehousing Industries

advanced 1.6 percent in the first quarter of 

2010 subsequent to a 1.5-percent gain in the 

last quarter of 2009. For the 3-month period 

ended March 2010, higher prices received by 

the industries for couriers, airlines, pipeline 

transportation of crude oil, long distance general freight trucking (less than truckload), line 

haul railroads, deep sea freight transportation, 

and Coastal and Great Lakes freight transportation outweighed lower prices received by 

the industries for long distance general freight 

truckers (truckload) and general warehousing 

and storage.

Traditional service industries

The Producer Price Index for the Net Output 

of Total Traditional Service Industries moved 

up 0.6 percent in the first quarter of 2010 

after increasing 0.3 percent in the fourth 

quarter of 2009. Leading this faster rate of 

advance, the industry index for direct health 

and medical insurance carriers increased 

3.5 percent in the 3-month period ended 

in March after edging up 0.2 percent from 

September to December. Prices received by 

offices of lawyers and by direct life insurance 

carriers also advanced at faster rates compared with the last quarter of 2009. The industry indexes for software publishers and passenger car rental turned up in the first quarter 

of 2010. By contrast, the depository credit 

intermediation industry group index fell 2.3 

percent from December 2009 to March 2010 

after rising 0.6 percent in the prior 3-month 

period. Prices received by securities brokerages

also turned down in the first quarter of 2010. 

The industry indexes for portfolio managers

and general medical and surgical hospitals

increased less than they had in the 3-month 

period ended in December.

Further information is available from the PPI 

Section of Index Analysis and Public Information, 

at ppi-info@bls.gov or (202) 691-7705.

 C U R R E N T P R I C E T R E N D S

Notes

1

 Price movements for PPIs described in this text include preliminary data for the months of December 2009 through March 2010. 

All PPI data are recalculated 4 months after original publication to reflect late data received by survey respondents. Seasonally adjusted PPIs are recalculated, on an annual basis, for 5 years, to reflect more recent seasonal patterns.

2 Gross Domestic Product: Fourth Quarter 2009 (Third Estimate), BEA 10–11 (Bureau of Economic Analysis, Mar. 26, 2010).

3

 Ibid. 

4

 Ibid. 

5 Industrial Production and Capacity Utilization, G.17 (419) (Board of Governors of the Federal Reserve System, April 15, 2010), 

Table 1 (page 8) and Table 11 (page 14).

6

 Ibid. 

7

 Ibid.
 C U R R E N T P R I C E T R E N D S

10

8

 U.S. Federal Reserve. Industrial Production and Capacity Utilization Historical Data. Online at http://www.federalreserve.gov/

releases/g17/ipdisk/auto_sa.txt.

9

 See U.S. Bureau of Labor Statistics, Focus on Prices and Spending: Import and Export Prices, Volume 1, Number 1. Online at 

http://www.bls.gov/opub/focus/volume1_number1/ipp_1_1.htm (visited May 14, 2010).

10 U.S. Federal Reserve. Industrial Production and Capacity Utilization Historical Data. Online at http://www.federalreserve.gov/

releases/g17/ipdisk/utl_sa.txt.

11 See “World oil demand to hit record high this year—IEA,” Reuters.com, April 13, 2010. Online at http://uk.reuters.com/article/

idUKLDE63C0Q420100413 (visited May 10, 2010).

12 Gasoline Explained: Factors Explaining Gasoline Prices, Energy Information Administration. Online at http://tonto.eia.doe.gov/

energyexplained/index.cfm?page=gasoline_factors_affecting_prices (visited May 10, 2010).

13 Monthly Energy Review April 2010, Table 3.4, Petroleum Stocks, Energy Information Administration. Online at http://www.eia.

doe.gov/emeu/mer/pdf/pages/sec3_13.pdf (visited May 10, 2010).

14 Economic Research Service, U.S. Department of Agriculture, Farm Income and Costs. Online at http://www.ers.usda.gov/Briefing/FarmIncome/nationalestimates.htm.

15 Economic Research Service, U.S. Department of Agriculture, The Dairy Site, US Beef and Dairy Outlook Report. Online at http://

www.thedairysite.com/articles/2136/us-beef-and-dairy-outlook-report-december-2009.

16 Corn & Soybean Digest, “How Will the Market Balance Record Corn Production and Use?” Online at http://cornandsoybeandigest.com/marketing/market-balance-corn-production-use-0519/index.html?imw=Y (visited May 27, 2010).

17 National Agricultural Statistics Service, Dairy Products, February 2010 Highlights. Online at http://usda.mannlib.cornell.edu/

usda/nass/DairProd//2010s/2010/DairProd-04-01-2010.pdf (visited May 27, 2010).

18 GRAINNET, Food and Agricultural Policy Research Institute Study Sees Farm Income Decline and Lower Food Price Inflation, 

online at http://www.grainnet.com/articles/Food_and_Agricultural_Policy_Research_Institute_Study_Sees_Farm_Income_Decline_and_Lower_Food_Price_Inflation-90799.html.