Monthly Labor Review July 2006 3

Price Highlights 2005

Price highlights 2005: higher energy

prices again dominate producer prices

Joseph Kowal,

Antonio Lombardozzi,

William Snyders, and

Jonathan Weinhagen

are economists in the

Division of Industrial

Prices and Price

Indexes, Office of

Prices and Living

Conditions, Bureau of

Labor Statistics. E-mail:

ppi-info@bls.gov

The producer price indexes for finished,

intermediate, and crude goods all rose in

2005. The finished goods index, which

tracks the change in prices for completed products

ready to be sold for final use, advanced 5.4 percent

after rising 4.2 percent in 2004. (See table 1.) The

2005 advance marked the largest year-to-year

increase for finished goods prices since 1990. The

index for intermediate goods, which reflects the

change in prices for partially processed goods and

supplies consumed in the production process,

increased 8.6 percent in 2005 following a 9.2-percent

advance in 2004. The crude materials index, which

measures the change in prices for unprocessed

goods and raw materials, rose 21.1 percent in 2005

after advancing 17.4 percent a year earlier.

Energy prices were pushed significantly higher

by worldwide economic expansion, geopolitical

unrest in the Middle East, and the crippling effects

of two devastating hurricanes along the Gulf Coast

of the United States. The indexes for finished,

intermediate, and crude energy goods increased

23.9 percent, 26.2 percent, and 42.2 percent,

respectively. The stage-of-processing indexes for

goods other than energy and food, known as the

core indexes, registered smaller increases in 2005

than they had in 2004: 1.4 percent for finished

goods, 4.8 percent for intermediate goods, and 5.2

percent for crude goods. Lower prices for pork,

chicken, and dairy products limited increases in

the indexes for food at all three stages of

processing, resulting in advances of 1.7 percent

for finished consumer foods, 2.4 percent for

intermediate foods and feeds, and 1.6 percent

for crude foodstuffs and feedstuffs.

Energy goods

The indexes for energy goods at all three stages of

processing increased at faster rates in 2005 than a

year earlier, primarily as a result of rising prices for

natural gas and petroleum products. The index for

finished energy goods advanced 23.9 percent in

2005 following a 13.4-percent increase in the

preceding year. (See table 2.) Among finished

energy goods, prices for residential natural gas,

gasoline, residential electric power, and liquefied

petroleum gas rose more than they had in 2004. The

index for intermediate energy goods moved up 26.2

percent in 2005 after increasing 15.8 percent in the

prior year. The acceleration in prices for intermediate energy goods can be attributed to prices

for industrial natural gas, commercial natural gas,

gasoline, industrial electric power, commercial

electric power, and diesel fuel, which went up more

in 2005 than they had in 2004. The crude energy

goods index jumped 42.2 percent in 2005 compared

with a 35.9-percent gain in the previous year. This

faster rate of increase was caused by crude

petroleum prices rising more quickly than they had

in 2004. By contrast, prices for natural gas and coal

rose at slower rates than in the prior year.

Natural gas products. From December 2004 to

December 2005, the index for well-head natural gas

rose 43.7 percent after moving up 44.3 percent in

the prior year. Prices for utility natural gas—

residential natural gas, commercial natural gas,

industrial natural gas, and natural gas to electric

utilities—also increased significantly in 2005, as

producers passed on their higher natural gas

Joseph Kowal, Antonio

Lombardozzi, William

Snyders, and

Jonathan Weinhagen

Prices for finished goods as a whole rose at their

fastest rate since 1990, with large price increases

for energy goods accompanied by small advances

for goods other than foods and energy
4 Monthly Labor Review July 2006

Price Highlights 2005

input costs. For the 12 months ended December 2005, the indexes

for industrial natural gas, commercial natural gas, residential

natural gas, and natural gas to electric utilities moved up 31.5,

30.3, 28.3, and 25.0 percent, respectively. Chart 1 displays the

monthly annual percentage changes for 2004 and 2005 for the

well-head natural gas index and the combined utility natural

gas index. The graph indicates that, although well-head natural

gas prices have tended to be more volatile than utility natural gas

prices, the two are closely related.

The well-head natural gas index and utility natural gas indexes

posted their largest 2005 gains during the summer and fall

months, as prices were driven up first by fears of hurricanes and

then by hurricane-related supply shocks along the Gulf Coast.

The Gulf of Mexico produces approximately 10 billion cubic feet

Annual percentage changes in producer price indexes for selected stages of processing, 2001–05

Finished goods ....................................................................... –1.6 1.2 4.0 4.2 5.4

Finished consumer foods ..................................................... 1.8 –.6 7.7 3.1 1.7

Finished energy goods ......................................................... –17.1 12.3 11.4 13.4 23.9

Finished goods less foods and energy ............................... .9 –.5 1.0 2.3 1.4

Finished consumer goods, excluding foods and energy ..... 1.5 –.5 1.1 2.2 1.6

Capital equipment ............................................................. 0 –.6 .8 2.4 1.2

Intermediate materials, supplies, and components ......... –4.0 3.2 3.9 9.2 8.6

Intermediate foods and feeds .............................................. .3 4.2 12.9 –2.3 2.4

Intermediate energy goods .................................................. –16.9 12.0 10.9 15.8 26.2

Intermediate materials less foods and energy .................... –1.6 1.5 2.1 8.3 4.8

Materials for nondurable manufacturing ........................... –5.5 4.2 4.9 13.7 8.9

Materials for durable manufacturing ................................. –4.0 3.1 4.0 18.3 5.9

Materials and components for construction ..................... 0 .8 3.0 10.1 6.1

Crude materials for further processing ............................... –32.5 24.7 19.5 17.4 21.1

Foodstuffs and feedstuffs ................................................... –7.6 4.5 24.1 –2.6 1.6

Crude energy materials ........................................................ –52.9 61.5 14.4 35.9 42.2

Crude nonfood materials less energy .................................. –9.9 12.6 21.6 20.5 5.2

Special groupings

Finished goods less energy ................................................. 1.2 –.5 2.7 2.5 1.5

Intermediate materials less energy ..................................... –1.5 1.6 2.6 7.8 4.6

Crude materials less energy ................................................ –8.3 7.1 23.3 5.2 3.0

Index 2001 2002 2003

Table 1.

2004 2005

Annual percentage changes in producer price indexes for selected energy items, 2001–05

Finished energy goods .......................................................... –17.1 12.3 11.4 13.4 23.9

Residential natural gas ........................................................ –22.1 9.3 19.9 15.9 28.3

Gasoline ............................................................................... –33.1 38.7 14.9 27.4 41.5

Residential electric power .................................................... 3.6 –1.0 4.9 2.3 6.8

Liquefied petroleum gas ....................................................... –55.3 95.2 21.0 28.5 44.3

Intermediate energy goods ................................................. –16.9 12.0 10.9 15.8 26.2

Industrial natural gas ........................................................... –36.7 12.2 20.3 20.1 31.5

Commercial natural gas ........................................................ –24.3 11.1 19.9 17.5 30.3

Natural gas to electric utilities ............................................. –39.9 27.1 17.4 20.4 25.0

Industrial electric power....................................................... 3.2 2.0 2.4 2.3 10.4

Commercial electric power ................................................... 4.4 –1.9 2.7 3.1 6.6

Diesel fuel ............................................................................ –44.7 54.4 13.0 37.9 46.7

Crude energy goods ............................................................ –52.9 61.5 14.4 35.9 42.2

Crude petroleum ................................................................... –42.4 60.6 14.3 30.5 49.6

Natural gas ........................................................................... –65.6 89.1 17.2 44.3 43.7

Coal ...................................................................................... 10.1 1.0 2.1 10.0 9.7

Index 2001 2002 2003

Table 2.

2004 2005
Monthly Labor Review July 2006 5

per day of natural gas, which at 17 percent of total U.S. consumption is crucial to the domestic supply of natural gas.1

 In

September 2004, Hurricane Ivan struck the Gulf Coast and

reduced domestic natural gas production almost 7 percent,

according to the U.S. Department of Energy’s natural gas

production statistics.2 After significant hurricane-related supply

shocks in 2004, anticipation of a similarly severe hurricane season

led to rising natural gas prices in the summer of 2005. Additionally,

because peak power demand is typically covered by operating

natural gas-fired generators, the warm summer weather pushed

up natural gas prices. Well-head natural gas prices rose 13.6

percent in July and 6.8 percent in August 2005. Consequently,

prices for all types of utility natural gas also increased during

those months.

 Hurricanes Katrina and Rita struck the Gulf Coast on August

29 and September 23, substantially reducing natural gas

production. The hurricanes also severely damaged a number of

natural gas pipelines and processing facilities.3 According to the

Department of Energy, domestic dry natural gas production

dropped approximately 13.3 percent from August to October

2005.4

 This reduction in domestic supply led to well-head natural

gas price increases of 32.1 percent in September and 18.1 percent

in October. Prices for all types of utility natural gas also exhibited

strong increases in September and October. Natural gas

production began to recover toward the end of 2005, pushing

prices back down. The well-head natural gas index fell 1.3 percent

in November and 14.5 percent in December. Prices for all types of

utility natural gas also showed declines in November and

December.

Petroleum products. The crude petroleum index jumped 49.6

percent in 2005 after increasing 30.5 percent in the preceding

year. Crude petroleum price increases in 2005 were passed

through to prices for refined petroleum products, which also

rose substantially in 2005. Prices for gasoline, diesel fuel, home

heating oil, and jet fuels moved up significantly in 2005.

The first notable price increases occurred in March 2005, as

the indexes for crude petroleum, gasoline, diesel fuel, home

heating oil, and jet fuels rose 17.0, 5.8, 9.4, 8.0, and 11.6 percent,

respectively, partially in reaction to a report by the International

Energy Agency that raised the agency’s forecast of global oil

demand for the third consecutive month.5

 Additionally, cold

weather in the Northeast increased demand for home heating oil,

which is derived from crude petroleum.

As with natural gas-based products, the most significant

events affecting the petroleum market in 2005 were hurricaneChart 1. Twelve-month percentage changes in prices of natural gas products, by month, 

January 2004-December 2005

January April July October January April July October

-40

-20

0

20

40

60

80

100

120

140

-40

-20

0

20

40

60

80

100

120

140

Wellhead 

natural 

gas

Utility 

natural 

gas

2004 2005

Percent change Percent change
6 Monthly Labor Review July 2006

Price Highlights 2005

related supply shocks. Normal crude oil production in the Gulf of

Mexico is 1.6 million barrels per day, which represents 7.6 percent

of domestic consumption.6

Prices for crude and refined petroleum products increased

significantly in the summer of 2005 on predictions of a severe

hurricane season. Low gasoline stock levels also contributed to

the summer 2005 runup in prices for petroleum products.

Department of Energy data indicate that in July and August 2005

gasoline stocks were 1.9 percent and 6.8 percent lower than they

had been 12 months earlier.7

Hurricane fears were realized when Katrina and Rita hit. These

hurricanes destroyed 111 production platforms and damaged 52

others. Moreover, a number of drilling rigs were destroyed.8

Department of Energy production statistics on crude oil indicate

that petroleum production in Alabama, Arkansas, Louisiana,

Mississippi, New Mexico, and Texas fell 38.5 percent from July to

September, and total domestic production declined 22.2 percent

over the same period. Crude oil prices spiked to a high of $66.83

per barrel on September 29.9

 Despite reduced production, crude

petroleum prices retreated for the remainder of the fall as a result

of high storage levels, reduced demand from refineries that were

damaged during the hurricanes, and relatively warm weather.

Besides spikes in crude petroleum input costs, damage to

refineries also drove up prices for refined petroleum products.

The indexes for gasoline, diesel fuel, home heating oil, and jet

fuels all registered gains in September, and price increases

reached even higher levels in October for all of these indexes

except gasoline. Gasoline prices eased in October as imports

increased significantly and offset the reduced domestic supply.

Department of Energy statistics on gasoline imports show a 41-

percent increase from the final week in July to the first week in

October.10

Liquefied petroleum gas. The index for liquefied petroleum

gas jumped 44.3 percent in 2005 after climbing 28.5 percent in

the preceding year. Large gains in the index occurred in March,

August, and September 2005, months when either crude

petroleum or natural gas prices increased substantially; crude

petroleum and natural gas are inputs to liquefied petroleum

gas production. In 2005, crude petroleum and natural gas

prices surged 49.6 and 43.7 percent, respectively.

Electric power. The index for electric power rose 7.6 percent

in 2005 after posting a 2.5-percent gain in 2004. The residential

electric power index climbed 6.8 percent after advancing 2.3

percent in the prior year. Prices for commercial electric power

moved up 6.6 percent compared with a 3.1-percent advance in

the previous year, and the industrial electric power index jumped

10.4 percent in 2005 following a 2.3-percent gain a year earlier.

Prices for electric power increased in 2005 mainly as a result of

higher prices for natural gas and coal, both of which are important

inputs to electric power production. Natural gas-fired electricity

generators are used especially during times of peak demand for

electric power. In 2005, the index for natural gas to electric utilities

increased 25.0 percent, and the index for coal rose 9.7 percent.

Prices for all types of electric power showed their greatest gains

for the year in October and November, when hurricanes pushed

natural gas prices to record levels.

Finished goods other than foods and energy

The producer price index for finished goods other than foods

and energy moved up 1.4 percent in 2005 compared with a 2.3-

percent gain a year earlier. (See table 3.) Prices for capital

equipment, which had increased at a 2.4-percent rate in 2004,

advanced at a slower rate, 1.2 percent, in 2005. The index for

finished consumer goods other than foods and energy also rose

less than it had in the preceding year.11 Prices for passenger cars

and light motor trucks turned down in 2005, accounting for most

of the deceleration in the core index for finished goods.

In terms of capital equipment, prices for civilian aircraft, railroad

equipment, and truck trailers advanced at slower rates than they

had in 2004, while the electronic computers index fell at a faster

rate during the same period. In contrast, price declines for

communication and related equipment slowed in 2005 compared

with the preceding year, and the index for heavy motor trucks

moved up more than it had in 2004.

Among finished consumer goods other than foods and

energy, prices for mobile homes, pet food, and book publishing

advanced less in 2005 than they had in 2004. The indexes for

men’s and boys’ apparel and for women’s, girls’, and infants’

apparel turned down in 2005. In contrast, prices for cigarettes,

alcoholic beverages, pharmaceutical preparations, and sanitary

papers and health products increased at faster rates than they

had in 2004.

Motor vehicles and equipment. In 2005, prices for passenger

cars fell 3.4 percent, and prices for light motor trucks dropped 5.9

percent. Both indexes advanced in 2003 and 2004. Domestic sales

of automobiles produced in North America moved up 2.4 percent

in 2005, their first increase since 1999. From 1999 to 2004, these

sales had declined 23.4 percent. In the light motor truck segment,

however, sales inched down 0.6 percent in 2005 after advancing

4.0 percent in 2004 and 2.0 percent in 2003.12 On a related note,

more than 200,000 hybrid vehicles were sold in the United States

in 2005, constituting about 1.2 percent of annual total unit sales.

In 2000, fewer than 10,000 hybrid vehicles were sold in the United

States.13 These shifts in sales to the more fuel-efficient passenger

cars may be linked to higher gasoline prices: retail gasoline prices

jumped 16.1 percent in 2005, to nearly double their 2001 level.14

Alternatively, the heavy motor trucks index rose 5.3 percent in

2005, outpacing a 3.4-percent gain posted in 2004. Unit retail

sales of heavy motor trucks climbed 15.0 percent in 2005

compared with 31.4 percent in 2004.15
Monthly Labor Review July 2006 7

Civilian aircraft. The producer price index for civilian aircraft

increased 3.9 percent in 2005 following advances of 7.1 percent

in 2004 and 6.1 percent in 2003. In terms of material and supply

costs, prices for steel mill products fell 3.8 percent in 2005 after

climbing 48.8 percent in the previous year, and price increases

for aluminum mill shapes slowed to 5.0 percent after a 9.9-percent

gain in 2004. However, prices for nonferrous wire and cable

moved up 21.1 percent in 2005, outpacing an already steep 13.5-

percent rate of increase in 2004, and prices for industrial electric

power surged 10.4 percent compared with a more moderate 2.3-

percent rise a year earlier.16 In 2005, civilian aircraft shipments

rose to 4,171 units, a 21.3-percent increase from 2004, when 3,440

civilian aircraft were shipped.17 In the civilian aircraft category,

general aviation shipments jumped 25.7 percent, helicopter

shipments increased 14.9 percent, and transport aircraft

shipments inched up 2.5 percent.18

Cigarettes and alcoholic beverages. The index for cigarettes

rose 4.8 percent following a 1.1-percent advance in the preceding

year, and prices for alcoholic beverages increased 4.7 percent

after inching up at a 0.6-percent rate a year earlier.19 In January

2005, cigarette prices jumped 3.4 percent, followed by gains of

0.6 percent and 1.2 percent in February and April. Higher prices

for cigarettes may be partly related to the Fair and Equitable

Tobacco Reform Act, passed by Congress in October 2004. This

law, which took effect January 1, 2005, eliminated U.S. Government

involvement with quotas and price supports paid to tobacco

farmers. In its place, the law stipulated that a quota-based form

of price supports would continue, now funded by tobacco

product manufacturers and importers. Each firm now contributes

to a price support fund in relation to its share of domestic sales.20

In the alcoholic beverages sector, higher prices were reported for

canned beer and for beer barrels and kegs. The indexes for bottled

beer, grape table wines, and distilled spirits also contributed to

the overall gain. Higher input prices for beverage containers

played a part in the increases, with aluminum sheet prices rising

4.9 percent and the index for glass containers edging up 1.7

percent in 2005.21

Pharmaceutical preparations. The producer price index for

pharmaceutical preparations increased 6.0 percent in 2005

following a 4.4-percent gain in 2004. Most of the 2005 rise can be

attributed to higher prices for prescription drugs, with over-thecounter medications advancing at a more tempered pace.22 In

December 2003, the Medicare Prescription Drug Improvement

and Modernization Act expanded Medicare coverage to include

a prescription drug benefit for seniors eligible for Medicare.23

Intermediate materials other than foods and

energy

The increase in the producer price index for intermediate materials

other than foods and energy slowed to 4.8 percent in 2005

following an 8.3-percent gain in the previous year. (See table 4.)

This price deceleration was broad based, reflecting tempered

increases for materials for durable manufacturing, nondurable

manufacturing materials, and construction materials.

Annual percentage changes in producer price indexes for selected finished goods other than foods and

energy, 2001–05

Finished goods other than foods and energy .................... 0.9 –0.5 1.0 2.3 1.4

Capital equipment ............................................................. 0 –.6 .8 2.4 1.2

Electronic computers ........................................................ –29.9 –20.5 –17.1 –12.3 –23.2

Communication and related equipment ............................. –.7 –2.6 –.9 –2.1 –.7

Light motor trucks ............................................................. –3.3 –3.6 2.3 1.0 –5.9

Heavy motor trucks .......................................................... .3 4.3 –1.9 3.4 5.3

Truck trailers ..................................................................... –1.1 .3 1.0 9.7 4.3

Civilian aircraft .................................................................. 3.8 2.1 6.1 7.1 3.9

Railroad equipment ............................................................ –1.0 0 2.1 11.6 5.9

Finished consumer goods other than foods and energy .. 1.5 –.5 1.1 2.2 1.6

Alcoholic beverages .......................................................... 2.6 1.1 2.0 .6 4.7

Pet food ............................................................................ 3.3 –.6 .4 7.3 1.0

Women’s, girls’, and infants’ apparel ................................ — — — .8 –.7

Men’s and boys’ apparel ................................................... — — — .4 –2.8

Pharmaceutical preparations ............................................ — 3.9 4.7 4.4 6.0

Sanitary papers and health products ............................... 1.6 .4 –.4 .4 3.3

Book publishing ................................................................. 3.4 3.2 4.0 4.6 3.7

Passenger cars ................................................................. –1.6 –2.6 2.0 1.7 –3.4

Cigarettes .......................................................................... 14.1 –5.8 –.8 1.1 4.8

Mobile homes .................................................................... 2.2 .5 3.8 12.6 4.8

NOTE: Dash indicates data are not available.

Index 2001 2002 2003

Table 3.

2004 2005
8 Monthly Labor Review July 2006

Price Highlights 2005

Materials for durable manufacturing. The index for materials

for durable manufacturing moved up 5.9 percent in 2005 after

jumping 18.3 percent in 2004. This deceleration was the result of

downturns in prices for steel mill products and hardwood lumber,

combined with a slower rate of increase in the aluminum mill

shapes index. Alternatively, prices for prepared paint rose more

rapidly in 2005 than they had in the prior year, and the flat glass

index turned up in 2005.

Prices for steel mill products declined 3.8 percent for the 12

months ended December 2005 following a 48.8-percent surge

in the previous 12-month period: by the end of 2004, steel

prices had hit a record high. Prices for ferrous scrap, which is

a major input to steel mills, advanced 50.8 percent during 2004.

In response to rising costs, steel mills added scrap surcharges

to their products’ selling prices. During the first quarter of

2005, prices remained moderately stable, as mills had difficulty

getting buyers to accept additional price increases. From March

through August, steel prices declined as a result of high

inventory levels and lower demand. Hurricanes Katrina and Rita

did very little damage to the steel industry infrastructure;

however, fuel surcharges and higher scrap prices resulted in

price increases for steel mill products during the remainder of

2005.

 In 2005, the index for hardwood lumber fell 1.2 percent

following a 3.0-percent gain in the preceding year. The first half

of 2005 was dominated by price declines, which were caused by

an influx of imports from Asia. These lower lumber prices

rebounded during the latter half of the year as continued strength

in the housing market fueled consumer demand for hardwood

furniture, cabinets, and flooring.24

Materials for nondurable manufacturing. The index for

materials for nondurable manufacturing advanced 8.9 percent in

2005 following a 13.7-percent gain in 2004. Prices for primary

basic organic chemicals, plastic resins and materials, and paper

also rose at slower rates than they had in the previous year. The

indexes for intermediate basic organic chemicals and paperboard

turned down after increasing in 2004. In contrast, prices for

inedible fats and oils turned up following declines in the prior

year.

For the 12 months ended December 2005, prices for primary

basic organic chemicals increased 22.3 percent compared with a

44.0-percent jump in the previous year. Contributing to the

advance in 2005 were a 15.0-percent price increase for aromatics,

a 25.2-percent boost for the liquid refinery gases index, and a rise

of 6.8 percent for other primary basic organic chemicals.25 Higher

input costs, specifically for crude petroleum, which is heavily

used in the chemical production process, caused the 2005

increases.

Subsequent to their 28.6-percent rise in 2004, producer prices

for plastic resins and materials advanced 10.8 percent in 2005.

Prices for thermoplastic resins and thermosetting resins climbed

12.0 and 5.5 percent, respectively, in 2005. These increases can

be traced to higher petroleum prices, the main input in the plastics

production process. Additionally, a tight supply situation pushed

prices higher throughout the year.

Annual percentage changes in producer price indexes for selected intermediate materials other than foods

and energy, 2001–05

Intermediate goods other than foods and energy ........... –1.6 1.5 2.1 8.3 4.8

Materials for durable manufacturing.............................. –4.0 3.1 4.0 18.3 5.9

Steel mill products ......................................................... –6.1 11.1 1.7 48.8 –3.8

Aluminum mill shapes ..................................................... –2.9 –.9 –.5 9.9 5.0

Hardwood lumber............................................................ –5.0 2.0 7.0 3.0 –1.2

Flat glass ....................................................................... .6 .1 –1.0 –1.7 3.3

Prepared paint ............................................................... 1.9 1.8 2.8 4.0 7.9

Materials for nondurable manufacturing ....................... –5.5 4.2 4.9 13.7 8.9

Primary basic organic chemicals ................................... –29.5 41.1 22.3 44.0 22.3

Plastic resins and materials .......................................... –9.8 9.2 6.4 28.6 10.8

Intermediate basic organic chemicals ........................... –11.3 20.0 7.6 35.5 –14.7

Paperboard ..................................................................... –7.0 –.2 –4.1 12.3 –3.0

Paper .............................................................................. –3.1 –.8 .2 6.1 5.0

Basic inorganic chemicals ............................................. 7.1 .8 2.9 7.3 17.7

Fats and oils, inedible ................................................... 23.8 40.0 29.4 –15.6 11.9

Construction materials and components ....................... 0 .8 3.0 10.1 6.1

Fabricated structural metal products ............................ –.4 .8 .6 17.6 2.9

Millwork ........................................................................... 1.7 .1 2.4 6.1 2.3

Softwood lumber ............................................................ –2.4 2.4 8.3 9.9 –.4

Fabricated ferrous wire products ................................... –.5 .1 2.9 17.6 1.5

Concrete products ......................................................... 2.5 –.3 1.5 7.6 10.1

Plastic construction products ........................................ –2.7 3.1 3.2 7.2 21.6

Index 2001 2002 2003

Table 4.

2004 2005
Monthly Labor Review July 2006 9

The index for inedible fats and oils rose 11.9 percent in 2005

following a 15.6-percent drop a year earlier. Much of this increase

occurred in the first quarter of 2005, when dry weather in South

America reduced available imports and drove prices up 17.6

percent. Later in the year, price increases tapered off as additional

supplies became available. The responsiveness of this index to

movements in agricultural prices makes it quite volatile. Products

derived from inedible fats and oils include industrial oils,

lubricants, and glycerin.

Materials and components for construction. Prices for

materials and components for construction climbed 6.1 percent

during 2005 after advancing 10.1 percent in the previous year.

Contributing to this deceleration were the indexes for fabricated

structural metal products, millwork, and fabricated ferrous wire

products, which all increased less rapidly than they had in 2004.

Prices for steel mill products and softwood lumber turned down

in 2005 after rising a year earlier. Alternatively, the rates of

increase in the indexes for plastic construction products and

concrete products quickened from 2004 to 2005.

Prices for fabricated structural metal products climbed 2.9

percent in 2005 after advancing 17.6 percent in the preceding

year. From 2000 to 2003, this index showed little movement.

Starting in January 2004, however, prices rose rapidly for 13

months as a result of large increases in steel prices. By February

2005, prices had returned to their previous, settled behavior and

remained steady until October, when fuel surcharges resulted in

more rapid price advances.

During 2005, the producer price index for plastic construction

products shot up 21.6 percent compared with a 7.2-percent gain

in 2004. Much of this increase can be attributed to an upsurge in

prices for plastic plumbing products, which rose 38.9 percent for

the year as prices for plastic resins and materials increased. The

aftermath of Hurricanes Katrina and Rita greatly disrupted the

supply of resins, driving up prices for both resins and plastic

products for the remainder of the year.

Crude nonfood materials less energy

Following a 20.5-percent jump in 2004, the producer price index

for basic industrial materials gained 5.2 percent in 2005. (See

table 5.) This deceleration was brought on by falling prices for

iron and steel scrap and for wastepaper, along with slower price

increases for copper ores. Conversely, the index for raw cotton

turned up in 2005, and prices for copper base scrap advanced

more than they had in 2004.

Iron and steel scrap. The index for iron and steel scrap fell 10.8

percent in 2005. Ferrous scrap prices registered significant

increases in 2003 and 2004—64.9 and 50.8 percent, respectively.

In the first half of 2005, falling scrap prices predominated as

imports of inexpensive steel-scrap substitutes flooded the

domestic market. Scrap prices recovered somewhat in the second

half of the year, as imports of scrap substitutes dried up when

Hurricanes Katrina and Rita resulted in prolonged port closures.

Copper ores. Prices for copper ores moved up 39.3 percent in

2005 compared with a 65.1-percent advance in the prior 12-month

period, while the index for copper base scrap jumped 51.9 percent

in 2005 following a 34.5-percent gain a year earlier. In 2005,

increased demand pushed global copper prices higher. The

current growth in the Chinese economy has increased demand

for copper, brass, and bronze materials used by the construction,

utilities, and automotive sectors.26

Raw cotton. For the 12-month period ended December 2005,

raw cotton prices advanced 16.0 percent following a 35.5-percent

decline in the preceding year. Not only did yield per acre decline

almost 5 percent in 2005, but total demand also was higher. Total

consumption increased more than 6 percent above 2004 levels,

and exports rose 12 percent.27

Foods and related products

The producer price index for finished consumer foods moved up

1.7 percent in 2005 following a 3.1-percent gain in 2004 and a 7.7-

percent jump in 2003. (See table 6.) Accounting for the slower

rate of advance in 2005 were prices for pork products, dairy

products, processed turkeys, and fresh fruits and melons, which

all turned down after rising in the preceding year. The indexes for

confectionery end products, soft drinks, and finfish and shellfish

increased less than they had in 2004.28 In contrast, prices for

Annual percentage changes in producer price indexes for selected crude nonfood materials less energy,

2001–05

Crude nonfood materials less energy ................................ –9.9 12.6 21.6 20.5 5.2

Iron and steel scrap ............................................................. –5.6 27.8 64.9 50.8 –10.8

Wastepaper .......................................................................... –30.2 35.1 8.7 17.3 –9.1

Copper ores .......................................................................... –19.6 3.6 37.4 65.1 39.3

Copper base scrap ............................................................... –17.4 11.2 30.7 34.5 51.9

Raw cotton ........................................................................... –46.7 42.7 37.5 –35.5 16.0

Index 2001 2002 2003

Table 5.

2004 2005
10 Monthly Labor Review July 2006

Price Highlights 2005

fresh and dry vegetables, beef and veal, and eggs for fresh use

advanced in 2005 following declines in the prior year.

At the earlier stages of processing, the index for intermediate

foods and feeds climbed 2.4 percent in 2005 compared with a 2.3-

percent decrease in 2004. Upturns in prices for prepared animal

feeds, beef and veal, and refined sugar and byproducts

outweighed downturns in prices for dairy products, pork

products, and shortening and cooking oils. The producer price

index for crude foodstuffs and feedstuffs also moved up in 2005

following a decline in 2004. Prices for slaughter cattle, soybeans,

corn, and fresh and dry vegetables rose after falling in the prior

year. Prices for wheat fell less in 2005 than they had a year earlier,

while the index for raw cane sugar and byproducts rose more

than in 2004. Conversely, the indexes for slaughter hogs,

slaughter broilers and fryers, fluid milk, and fresh fruits and

melons decreased following increases in 2004.

Slaughter cattle, beef and veal. The producer price index for

slaughter cattle jumped 9.5 percent in 2005 following a 10.9-

percent drop in 2004. Prices for beef and veal performed similarly,

falling in 2004 then rebounding with a 3.2-percent gain in 2005.

For both slaughter cattle and beef and veal, prices began to turn

around in September 2005, when foreign markets began

reopening to U.S. livestock products. In late 2003, a cow in

Washington state was identified as having Bovine Spongiform

Encephalopathy (BSE). In response, Japan, South Korea, and

Taiwan, which purchased over 80 percent of exported U.S. beef

in 2003, closed their markets to U.S. cattle products.29,30 After

exporting more than 2.5 billion pounds of beef and veal

products in 2003, the United States saw its exports drop to

461 million pounds in 2004. In 2005, the export market began

reversing course, totaling 669 million pounds, as exports to

Mexico expanded. Late in the year, Japan reopened its beef

market to U.S. production of boneless beef products taken

from livestock under 30 months at slaughter, and both South

Korea and Taiwan prepared to take similar actions.31,32

Slaughter hogs, processed pork. The producer price index for

slaughter hogs dropped 14.7 percent in 2005 after surging 48.7

percent a year earlier. Likewise, the index for processed pork fell

8.2 percent following a 22.1-percent gain in 2004. The price spikes

of 2004 were linked to strong domestic demand, combined with a

26.9-percent jump in U.S. exports, as foreign buyers substituted

pork for beef. Although production inched up in 2004, it was

unable to keep pace with higher demand. In 2005, production

and exports continued their increases, but a decline in domestic

consumption sent selling prices downward.33

Slaughter broilers and fryers, processed young chickens. The

index for slaughter broilers and fryers moved down 7.3 percent in

2005 following a 4.3-percent rise in 2004, and prices for processed

young chickens fell at a faster rate in 2005 than they had in the

Annual percentage changes in producer price indexes for selected foods and related items, 2001–05

Finished consumer foods ...................................................... 1.8 –0.6 7.7 3.1 1.7

Finished consumer foods, crude ...................................... 4.6 –13.9 34.1 –3.1 10.7

Fresh fruits and melons .................................................... 24.0 –34.6 30.5 18.0 –12.2

Fresh and dry vegetables ................................................. 9.7 –5.5 37.9 –13.9 34.3

Eggs for fresh use ............................................................ –27.5 22.6 40.5 –29.4 5.0

Finished consumer foods, processed .............................. 1.6 .4 5.9 3.6 1.0

Bakery products ............................................................... 2.1 2.0 1.3 2.1 2.4

Beef and veal .................................................................... –4.5 4.0 27.1 –3.8 3.2

Pork products .................................................................... 4.7 –7.2 6.8 22.1 –8.2

Processed young chickens .............................................. 1.9 –8.6 19.9 –.9 –3.1

Dairy products .................................................................. 2.3 –3.1 6.8 9.1 –2.6

Processed fruits and vegetables ..................................... 3.4 1.2 .4 3.1 3.4

Confectionery end products ............................................. 1.9 1.8 5.1 7.2 2.8

Roasted coffee ................................................................. –3.5 –.2 5.1 9.5 8.8

Intermediate foods and feeds ............................................ .3 4.2 12.9 –2.3 2.4

Flour ................................................................................... 4.1 7.2 5.0 4.9 2.6

Refined sugar and byproducts ......................................... 6.3 6.2 .8 –.8 18.5

Shortening and cooking oils ............................................. 1.8 15.6 16.1 .2 –3.3

Prepared animal feeds ...................................................... –3.6 4.0 14.7 –11.1 5.6

Crude foodstuffs and feedstuffs ......................................... –7.6 4.5 24.1 –2.6 1.6

Wheat ................................................................................ 1.7 24.0 4.0 –5.0 –1.0

Corn ................................................................................... 2.8 13.2 6.8 –22.9 .7

Slaughter cattle ................................................................. –15.1 10.3 35.4 –10.9 9.5

Slaughter hogs .................................................................. –24.9 –4.6 20.7 48.7 –14.7

Slaughter broilers and fryers ............................................ –4.8 –5.1 35.4 4.3 –7.3

Fluid milk ........................................................................... 3.0 –11.4 16.1 19.1 –9.8

Soybeans .......................................................................... –12.5 29.6 40.7 –29.7 7.0

Raw cane sugar and byproducts ...................................... 6.2 2.7 –6.6 1.2 18.6

Index 2001 2002 2003

Table 6.

2004 2005
Monthly Labor Review July 2006 11

previous year. From January through September, production,

domestic consumption, and export demand for chickens were

strong. The market shifted direction in the last quarter of 2005,

when chicken production reached its peak and demand for leg

quarters in Eastern Europe and Central Asia fell. This drop in

demand may have been connected to fears relating to the spread

of avian influenza. As a result, in the final quarter of 2005,

slaughter chicken prices decreased 16.2 percent, and processed

chicken prices fell 15.5 percent.34 For the 12 months ending in

December 2005, broiler meat production increased 3.8 percent,

and cold storage stocks jumped 29.0 percent.35

Soybeans and grains, prepared animal feeds. The indexes for

corn and soybeans turned up in 2005 following large declines in

2004, while prices for wheat moved down 1.0 percent after falling

5.0 percent a year earlier. The U.S. Department of Agriculture

estimated that the corn harvest for 2005 was an ample 11.1 billion

bushels, 6.0 percent below the record level of 11.8 billion bushels

in 2004. Crop yield also contracted in 2005, from a record 160.4

bushels per acre in 2004 to 147.9 bushels per acre. The soybean

harvest inched down 1.0 percent in 2005 to 3.09 billion bushels

despite a 2.6-percent increase in yield per acre, from 42.2 bushels

in 2004 to a record 43.3 bushels. For wheat, yield per acre fell

roughly 2.8 percent to 42.0 bushels, and total production was 2.1

billion bushels.36 While still solid, the 2005 wheat figures were

not historic compared with harvests over the previous decade.37

In a related development, prepared animal feed prices rose 5.6

percent in 2005 compared with an 11.1-percent drop in the

preceding year.

Fluid milk, dairy products. The index for fluid milk fell 9.8

percent in 2005 after rising 19.1 percent in 2004. Similarly, prices

for dairy products declined 2.6 percent following a 9.1-percent

jump in 2004. In 2005, milk production increased 3.3 percent to

176.5 million pounds, and milk production per cow grew 3.1

percent to 19,536 pounds.38 In contrast, both total milk production

and output per cow were nearly flat in 2004 compared with 2003

levels.39

Raw cane and refined sugar. The index for refined beet sugar

and byproducts rose 22.0 percent in 2005 after edging down 0.1

percent in 2004. The index for refined cane sugar and byproducts

went up 15.8 percent after declining 1.5 percent in the prior year,

and prices for raw cane sugar jumped 18.6 percent following a

1.2-percent gain a year earlier. The market for refined sugar was

influenced by lower sugar beet and raw cane production in 2005:

the sugar beet harvest decreased 7.9 percent in 2005 to 27,654

tons, and raw cane production fell 3.8 percent to 27,897 tons.40

Fruits and melons. The index for fresh fruits and melons

declined 12.2 percent in 2005 after rising 18.0 percent in 2004.

Prices for citrus fruits, which were increasing at a 16.2-percent

annual rate in May 2004, the start of the hurricane season,

surged 134.2 percent over the next 5 months. In 2005, prices

reversed course and ended the year 11.7 percent below their

2004 level. For the 2004–05 growing season, western producers

ramped up production to help compensate for the previous year’s

citrus grove damage in Florida.41, 42 Also contributing to the 2005

turnaround in prices for fresh fruits was the index for table grapes,

which dropped 28.6 percent after jumping 48.4 percent during

the prior 12 months.43 Average grape yield per acre increased to

7.46 tons in 2005, from 6.69 tons in 2004. Over the same period,

total grape production increased 11.7 percent to 6,975 tons, from

6,240 tons a year earlier.44

Fresh and dry vegetables. The index for fresh and dry

vegetables surged 34.3 percent in 2005 after falling 13.9 percent

in the preceding year. Prices for sweet corn nearly tripled in 2005

compared with a 34.6-percent decline in 2004, and the indexes for

lettuce and dry onions also posted large gains following declines

a year earlier. Prices for green peppers, consumer-use potatoes,

and tomatoes went up at faster rates than they had in 2004.45

Vegetable crop production was, on average, favorably affected

by weather conditions in 2004 and negatively affected in

2005.46, 47 For lettuce and tomatoes, total planted acreage

increased in 2005, but total harvested acreage fell. Yields also

declined notably in 2005 for snap beans, cabbage, romaine

lettuce, onions, and green peppers.48

Services

Rising prices were observed for the majority of service

industries tracked by the Producer Price Index in 2005. Notable

price increases were registered for these industries: Scheduled

passenger air transportation, hotels (excluding casino hotels)

and motels, offices of lawyers, line-haul railroads, offices of

certified public accountants, direct health and medical

insurance carriers, and investment banking and securities

dealing. In contrast, price declines were recorded by cellular

and other wireless carriers. (See table 7.)

Scheduled passenger air transportation. Prices for scheduled

passenger air transportation increased 7.7 percent in 2005 after

falling 1.5 percent in the previous year. Domestic travel prices

increased 8.4 percent in 2005, led by higher prices for coachclass air travel. The 2005 rise in the index for scheduled passenger

air transportation reflects strong demand for air travel and fuel

surcharges added to ticket prices. According to the FAA: “In

2005, system revenue passenger miles (RPMs) and enplanements

rose 8.0 and 7.1 percent, respectively. . . . Enplanements exceeded

pre-9/11 levels by 5.9 percent, while RPMs were 11.6 percent

higher than in 2000. . . . The systemwide load factor increased 1.9

percent to 77.1 percent in 2005, an all-time high.” 49 In addition,

according to the International Air Transport Association, airlines
12 Monthly Labor Review July 2006

Price Highlights 2005

have been adding surcharges to passenger ticket prices in recent

years to offset higher fuel prices. The association estimated

that, at $54.50 per barrel in 2005, industry fuel costs amounted

to 22 percent of operating expenses, up from 16 percent in

2004 and 14 percent in 2003.50

Hotels (excluding casino hotels) and motels. The industry

index for noncasino hotels and motels increased 7.4 percent in

2005 after gaining 2.9 percent a year earlier. Prices in this industry

tend to be positively correlated to the performance of the

economy as a whole. Additionally, widely followed research in

the hotel industry has shed light on the detrimental impact of

deep discounting strategies, leading many hoteliers to reduce or

eliminate these price reductions.51 Prices for luxury and resort

hotels exhibited the largest gain, 22.5 percent.

Offices of lawyers. After rising 4.3-percent a year earlier, prices

received by law offices advanced 6.1 percent in 2005, the largest

annual increase recorded for this industry since its inclusion in

the Producer Price Index in 1996. Prices for corporate legal

services and for banking and commercial legal services increased

8.1 and 9.7 percent, respectively, reflecting a strong business

economy. Another factor boosting prices received by law offices

was the complexity of the 2005 Bankruptcy Reform Act, which

spurred demand for legal services from both individuals and

corporations.

Line-haul railroads. Having risen 7.4 percent in 2004, the linehaul railroads index increased 13.1 percent in 2005. Strong demand

and fuel surcharges pushed the line-haul railroads index higher

in 2005. This index tracks price changes for the rail shipment of all

major commodity groupings, both manufactured goods and raw

materials. New records were set in 2005 in this industry, for total

volume—1.69 trillion ton-miles, up 2.4 percent from last year—

and for intermodal traffic (truck trailers and containers on flat

cars).52 Intermodal freight transportation, the price of which

increased 10.4 percent in 2005, is the fastest growing segment in

this industry.53 Diesel fuel, which surged 46.7 percent in 2005, is

a critical variable cost for the railroad industry, which typically

uses surcharges to transfer these costs to its clients.

Offices of certified public accountants. Prices received by

offices of certified public accountants advanced 5.2 percent in

2005 after increasing 1.3 percent in 2004. This acceleration was

driven by the index for tax preparation and planning, which rose

6.9 percent in 2005, the largest gain recorded over the 10 years

that the Producer Price Index has tracked this service. The

Sarbanes-Oxley Act of 2002 and the robust economic

environment in 2005 increased the demand for accounting

services.

Direct health and medical insurance carriers. Prices received

by direct health and medical insurance carriers rose 4.8 percent in

2005 after gaining 4.0 percent in the prior year. The majority of

this price advance was the result of a 5.5-percent rise in the

medical service plans index. Rising prices for medical plans

continue to outpace both the Consumer Price Index and wage

growth. The percentage of businesses offering health insurance

to their workers has declined steadily from 69 percent in 2000 to

60 percent in 2005.54

Investment banking and securities dealing. Prices received

by the investment banking and securities dealing industry

advanced 2.1 percent in 2005 following a 6.8-percent gain in 2004.

Leading this deceleration were prices for dealer transactions,

which fell 10.4 percent in 2005 following a 2.5-percent increase in

2004. Prices for dealer transactions depend on the bid-ask spread

for debt and equity securities in the financial markets; in 2005, a

lack of volatility in security prices and fierce competition among

trading firms resulted in tighter spreads and lower dealer

transaction prices. The index for investment banking services

advanced 6.1 percent in 2005. This industry generally reflects

expectations concerning the overall economy and the equity

marketplace. The index for other investment banking and

Annual percentage changes in producer price indexes for selected service industries, 2001–05

Scheduled passenger air transportation ................................. 2.0 1.0 1.9 –1.5 7.7

Hotels (excluding casino hotels) and motels ......................... – – – 2.9 7.4

Offices of lawyers ................................................................... 4.2 3.4 2.8 4.3 6.1

Line-haul railroads ................................................................... 2.3 1.3 2.3 7.4 13.1

Offices of certified public accountants .................................. – – – 1.3 5.2

Direct health and medical insurance carriers ......................... – – 8.7 4.0 4.8

Investment banking and securities dealing ............................ – – – 6.8 2.1

Cellular and other wireless carriers ........................................ –1.2 3.9 –1.2 –4.7 –15.1

NOTE: Dash indicates data are not available.

Index 2001 2002 2003

Table 7.

2004 2005
Monthly Labor Review July 2006 13

securities-dealing services increased 13.1 percent for 2005; prices

for many of its components, such as securities-lending transactions, are sensitive to and have benefited from rising interest

rates.

Cellular and other wireless carriers. Prices received by

cellular and other wireless carriers fell 15.1 percent in 2005

following a 4.7-percent decline in 2004. The wireless telecommunications industry is highly competitive and is characterized

by major players trying to capture as much market share as

possible. To attract customers, wireless carriers have lowered

monthly subscription prices and adopted a fee-based strategy,

charging for roaming minutes and ringtones. This strategy takes

advantage of the changing cost structure within the industry:

technological advances have lowered wireless carriers’ fixed

infrastructure costs.

Notes

1

 Congressional Research Service, “Oil and Gas Disruption From

Hurricanes Katrina and Rita,” Lawrence Kumins and Robert Bamberger,

Report RL33124 (Washington, October 2005).

2 U.S. Department of Energy, U.S. Dry Natural Gas Production, on the

Internet at http://tonto.eia.doe.gov/dnav/ng/hist/n9070us2m.htm

(visited June 20, 2006).

3

 Congressional Research Service, “Oil and Gas Disruption.”

4

 U.S. Department of Energy, U.S. Dry Natural Gas Production.

5 Forbes News Scan, March 11, 2005, on the Internet at

www.forbes.com/business/2005/03/11/0311autonewsscan03.html

(visited June 20, 2006).

6

 U.S. Department of Energy, U.S. Dry Natural Gas Production.

7

 U.S. Department of Energy, U.S. Motor Gasoline Ending Stocks,

on the Internet at http://tonto.eia.doe.gov/dnav/pet/hist/mgtstus1m.htm

(visited June 20, 2006).

8

 Congressional Research Service, “Oil and Gas Disruption.”

9

 U.S. Department of Energy, Cushing, OK, WTI Spot Price FOB, on

the Internet at http://tonto.eia.doe.gov/dnav/pet/hist/rwtcd.htm

(visited June 20, 2006).

10 U.S. Department of Energy, U.S. Weekly Total Gasoline Imports,

on the Internet at http://tonto.eia.doe.gov/dnav/pet/hist/

wgtimus2w.htm (visited June 20, 2006).

11 In December 2004, the capital equipment index constituted 41.8

percent of the index for finished goods other than foods and energy,

and the index for finished consumer goods other than foods and energy

made up the remaining 58.2 percent.

12 U.S. Department of Commerce, Bureau of Economic Analysis,

National Economic Accounts—Gross Domestic Product—Motor

Vehicle Estimates, on the Internet at www.bea.gov/bea/dn/home/

gdp.htm (visited Feb. 27, 2006).

13 “Sales Numbers and Forecasts for Hybrid Vehicles,” on the

Internet at www.hybridcars.com/sales-numbers.html (visited Feb.

27, 2006).

14 See Consumer Price Index, Gasoline, U.S. City Average, Not

Seasonally Adjusted, Series Identifier CUUR0000SETB01; on the

Bureau of Labor Statistics (BLS) Web site at http://data.bls.gov/PDQ/

servlet/SurveyOutputServlet?series_id=CUUR0000SETB01.

15 U.S. Department of Commerce, Bureau of Economic Analysis,

National Economic Accounts—Gross Domestic Product—Motor

Vehicle Estimates.

16 To locate Producer Price Index (PPI) data, go to the PPI page on

the BLS Web site: www.bls.gov/ppi/home.htm. Then choose “Get

Detailed PPI Statistics,” and select customized tables, commodity data

(http://data.bls.gov/PDQ/outside.jsp?survey=wp). Enter codes for

the commodities of interest—in this case, 1017 (steel mill products),

102501 (aluminum mill shapes), 1026 (nonferrous wire and cable),

and 0543 (industrial electric power).

17 Aerospace Industries Association, “2005 Year-End Review and

Forecast,” December 14, 2005, on the Internet at www.aiaaerospace.org/stats/yr_ender/yr_end_tables.cfm (visited June 20,

2006).

18 Aerospace Industries Association, “2005 Year-End Review and Forecast.”

19 In December 2004, the index for cigarettes constituted 4.6 percent

of the index for finished goods other than foods and energy. The index

for alcoholic beverages made up 2.8 percent of that index.

20 Economic Research Service, “Long-Lived Tobacco Program to End,”

Amber Waves, Thomas C. Capehart, Jr. (Washington, U.S. Department of

Agriculture, February 2005), 2–3.

21 On the BLS Web site (see note 16 for instructions), enter commodity

codes 02610103 (canned beer), 02610105 (barrels and kegs), 02610101

(bottled beer), 02610431 (grape table wines), 026102 (distilled spirits,

excluding brandy), 10250105 (aluminum sheet), and 138 (glass

containers).

22 Although the Producer Price Index discontinued its commoditybased prescription drug and over-the-counter drug indexes in June 2001,

the Producer Price Index program continues to publish best estimate,

special aggregation indexes that allocate product line price information

to prescription and over-the-counter categories according to their

preponderance of revenue. In 2005, Producer Price Index code 32541DRX (prescription drugs) moved up 6.8 percent, while Producer Price Index

code 32541D-OTC (over-the-counter drugs) rose 1.0 percent.

23 Details about the prescription drug benefit can be found on the

Internet at www.medicare.gov/medicarereform/default.asp (visited

March 3, 2006).

24 Hardwood Market Report, “2005: The Year at a Glance” (Memphis,

TN, Hardwood Market Report, 2006).

25 On the BLS Web site (see note 16 for instructions), enter commodity

codes 06140197 (aromatics), 06140198 (liquid refinery gases), and

06140199 (other primary basic organic chemicals).

26 For details, see Tom Stundza, “Copper and Brass Market: Prices

remain high from supply disruptions,” Purchasing, March 2, 2006, on

the Internet at www.purchasing.com (visited June 20, 2006).

27 Economic Research Service, Market and Trade Economics Division,

Cotton and Wool Situation Outlook Yearbook CWS–2005 (Washington,

U.S. Department of Agriculture, November 2005), 24, appendix table 1.

28 On the BLS Web site (see note 16 for instructions), enter commodity

codes 022306 (processed turkeys), 0262 (soft drinks), and 0223 (finfish

and shellfish).

29 Information relating to this discovery and a subsequent discovery in

mid-2005, as well as the U.S. Government response, is on the Internet at

www.fda.gov/oc/opacom/hottopics/bse.html (visited June 20, 2006).
14 Monthly Labor Review July 2006

Price Highlights 2005

30 Economic Research Service, Livestock, Dairy, and Poultry Outlook

LDP-M-115 (Washington, U.S. Department of Agriculture, Jan. 16,

2004), 6.

31 Economic Research Service, Livestock, Dairy, and Poultry Outlook,

LDP-M-140 (Washington, U.S. Department of Agriculture, Feb. 15, 2006),

9–10, 22.

32 Unfortunately for U.S. beef exporters, almost immediately after

Japan reopened its market to American beef, banned beef product was

discovered in a shipment. While it appears that the Japanese, South

Korean, and Taiwanese markets will reopen, Japan froze imports for the

first quarter of 2006. Japan announced in June 2006 that it would lift the

ban on U.S. beef imports pending successful inspections of U.S. meat

processing plants. Negotiations with the other trading partners are

ongoing. See note 29 for additional information.

33 Economic Research Service, Livestock, Dairy, and Poultry Outlook,

LDP-M-140 (Washington, U.S. Department of Agriculture, Feb. 15, 2006),

13–15, 22.

34 For Producer Price Index 022203, processed young chickens,

seasonally adjusted data were used for the calculation. Producer Price

Index 014102, slaughter broilers and fryers, is not seasonally adjusted,

so unadjusted indexes were used for that calculation.

35 Economic Research Service, Livestock, Dairy, and Poultry Outlook,

LDP-M-140 (Washington, U.S. Department of Agriculture, Feb. 15, 2006),

16–18, 22.

36 Agricultural Statistics Board, Crop Production, 2005 Summary,

Cr Pr 2–1 (06) (Washington, U.S. Department of Agriculture, National

Agricultural Statistics Service, Jan. 12, 2006).

37 To review data for wheat production over the last decade, visit the

U.S. Department of Agriculture-National Agricultural Statistics Service

Web site at http://usda.mannlib.cornell.edu/reports/nassr/field/

pcp-bban/.

38 Agricultural Statistics Board, Milk Production, Da 1–1 (1–06)

(Washington, U.S. Department of Agriculture, National Agricultural

Statistics Service, Jan. 18, 2006).

39 Agricultural Statistics Board, Milk Production, Da 1–1 (1–05)

(Washington, U.S. Department of Agriculture, National Agricultural

Statistics Service, Jan. 18, 2005).

40 Agricultural Statistics Board, Crop Production, 2005 Summary,

Cr Pr 2-1 (06) (Washington, U.S. Department of Agriculture, National

Agricultural Statistics Service, Jan. 12, 2006), 52–53, 76.

41 Agricultural Statistics Board, Crop Production, 2004 Summary,

Cr Pr 2–1 (05) (Washington, U.S. Department of Agriculture, National

Agricultural Statistics Service, Jan. 12, 2005), 74.

42 Agricultural Statistics Board, Citrus Fruits, 2005 Summary,

Fr Nt 3–1 (05) (Washington, U.S. Department of Agriculture, National

Agricultural Statistics Service, Sept. 22, 2005).

43 Table grapes typically go out of season in December; consequently,

the end-of-year 12-month price data used for this comparison were

indexes for November.

44 Agricultural Statistics Board, Noncitrus Fruits and Nuts, 2005

Preliminary Summary, January 2006, Fr Nt 1–3 (06) (Washington,

U.S. Department of Agriculture, National Agricultural Statistics Service,

Jan. 24, 2006).

45 On the BLS Web site (see note 16 for instructions), enter commodity

codes 0113 (fresh and dry vegetables), 01130214 (sweet corn), 01130215

(lettuce), 01130216 (dry onions), 01130217 (tomatoes), 01130229

(green peppers), and 011304 (Irish potatoes for consumer use).

46 Agricultural Statistics Board, Crop Production, 2004 Summary,

Cr Pr 2–1 (05), 74.

47 Agricultural Statistics Board, Crop Production, 2005 Summary,

Cr Pr 2–1 (06), 80.

48 Agricultural Statistics Board, Vegetables, 2005 Summary, Vg 1–2

(06) (Washington, U.S. Department of Agriculture, National

Agricultural Statistics Service, Jan. 27, 2006).

49 Federal Aviation Administration, FAA Aerospace Forecasts, Fiscal

Years 2006–2017 (Washington, Department of Transportation, February

2006), 5, 12, on the Internet at www.faa.gov/data_statistics/aviation/

aerospace_forecasts/2006-2017/media/FAA%20Aerospace

%20Forecast.pdf (visited June 20, 2006).

50 International Air Transport Association, Fact Sheet: Fuel, on

the Internet at www.iata.org/pressroom/economics_facts/fact_

sheets/fuel.htm (visited June 26, 2006).

51 Talbot, Barbara, “If Discounting Doesn’t Work, What Does?” A

commentary on the Cornell Hospitality Research Report, “Why

Discounting Doesn’t Work” (Ithaca, NY, Cornell University School of

Hotel Administration), on the Internet at www.hotelschool.cornell.

edu/chr/research/abstracts/BTalbott.rtf (visited June 20, 2006).

52 Association of American Railroads, “U.S. Freight Railroads Complete

Another Record Year,” news release, Jan. 6, 2006, on the Internet at

www.aar.org/ViewContent.asp?Content_ID=3466 (visited June 20,

2006).

53 Association of American Railroads, “U.S. Freight Railroads Complete Another Record Year.”

54 Kaiser Family Foundation, “Survey Finds Steady Decline in

Businesses Offering Health Benefits to Workers Since 2000,” news

release, Sept. 14, 2005, on the Internet at www.kff.org/insurance/ chcm091405nr.cfm (visited June 20, 2006).