22  Monthly Labor Review • July 20

PPI Highlights, 2008

I

n a turnaround, the Producer Price Index 

(PPI) for finished goods fell 0.9 percent 

in 2008 after having risen 6.2 percent 

in 2007.1 The 2007 increase was the largest 

calendar-year advance since a 7.1-percent 

jump in 1981, and the 2008 decline was the 

first year-over-year decrease since a 1.6-percent drop in 2001. Similarly, the index for 

intermediate materials, supplies, and components—which reflects selling prices for 

goods produced at earlier stages of processing—moved down 2.3 percent in 2008 after 

having climbed 7.1 percent in 2007.2 The 

index for crude materials for further processing—that is, unprocessed goods and raw 

materials—dropped 24.6 percent in 2008 

following a 19.8-percent rise in 2007. The 

decreases at the earlier stages of processing 

also were the largest calendar-year declines 

since 2001, when the intermediate goods 

index moved down 4.0 percent and crude 

goods prices fell 32.5 percent. The reversals 

in 2008 are primarily attributable to prices 

for energy goods, which plummeted after 

having increased sharply a year earlier. In 

addition, prices for foods within the finished 

and intermediates goods stages advanced at 

much slower rates than they had in 2007, 

while the crude foodstuffs and feedstuffs index turned down in 2008.

Changes in the PPIs for services were not 

consistent with those of the mining and 

manufacturing sectors. Price increases for 

total transportation and warehousing industries slowed to 3.1 percent in 2008 from 6.6 

Producer prices reverse course in 2008

After surging in 2007 and the first 7 months of 2008, 

prices for energy goods plummeted during the final 5 months of the year; 

similarly, inflation in food prices slowed significantly in 2008, 

following a steep runup in 2007 and early-to-mid 2008 

Joseph Kowal, William Snyders, Antonio Lombardozzi,

and Lana Borgie are economists in the Office of Prices

and Living Conditions,

Bureau of Labor Statistics.

E-mail: ppi-info@bls.gov

Joseph Kowal,

William Snyders,

Antonio Lombardozzi,

and

Lana Borgie

percent in the previous year, and the index 

for total traditional services industries rose 

0.3 percent following a 1.8-percent increase 

in 2007. By contrast, margins received by total trade industries rose 7.3 percent in 2008 

after having gone up by 3.9 percent a year 

earlier. 

Stages of processing

Table 1 displays annual percentage changes 

in PPIs for selected stages of processing. 

In early-to-mid 2008, broad-based price 

increases that had begun accelerating in 

2007 remained widespread across all stages 

of processing. The reversal that followed is 

most vividly demonstrated by price changes 

in the energy sector. (See chart 1.) Prices for 

crude energy materials climbed 58.6 percent 

during the first 7 months of 2008, only to fall 

57.3 percent over the final 5 months of the 

year. (Crude energy materials include crude 

petroleum, natural gas, and coal.) Prices for 

intermediate energy goods surged 25.1 percent during the first 7 months of 2008, only 

to drop 37.4 percent over the remainder of 

the year, while the finished energy goods 

index jumped 19.2 percent though July and 

decreased by 33.9 percent during the rest of 

2008.3 Within the energy sector, changes in 

prices moved through successive processing 

stages almost instantaneously.4

In the foods and feeds sector, PPIs exhibited similar, though less extreme, price 

movements. (See chart 2.) After having 
Monthly Labor Review • July 2009  

Table 1. Annual percentage changes in Producer Price Indexes for selected stages of processing, 2004–08

Dec. 07 Jul. 08

Index 2004 2005 2006 2007 2008 to to

Jul. 08 Dec. 08

Finished goods.............................................................. 4.2 5.4 1.1 6.2 –0.9 6.8 –7.5

Finished consumer foods........................................ 3.1 1.7 1.7 7.6 3.2 4.9 –

Finished energy goods............................................ 13.4 23.9 –2.0 17.8 –20.3 19.2 –3

Finished goods less foods and energy ............... 2.3 1.4 2.0 2.0 4.5 2.7 

Finished consumer goods, exc

foods and energy ................................................. 2.2 1.6 1.8 2.4 4.6 2.8

Capital equipment................................................. 2.4 1.2 2.3 1.4 4.3 2

Intermediate materials, supplies,

and components........................................................ 9.2 8.6 2.8 7.1 –2.3 13.4 –14.1

Intermediate foods and feeds.............................. –2.3 2.4 4.7 17.2 2.0 17.8 –1

Intermediate energy goods.................................. 15.8 26.2 –3.3 19.8 –21.4 25.1 –3

Intermediate materials less fo

and energy............................................................... 8.3 4.8 4.5 3.3 2.9 9.6 –

Materials for nondurable manufacturing...... 13.7 8.9 1.2 12.8 –5.2 20.3

Materials for durable manufacturing.............. 18.3 5.9 12.5 1.7 –5.1 16.3

Materials and comp

for construction .................................................... 10.1 6.1 4.3 2.0 7.5 8.3 –.8

Components for manufacturing ...................... 2.1 1.8 4.1 .4 3.7 

Supplies to nonmanufacturing indus

less feeds................................................................ 5.7 3.4 3.0 2.2 5.6 6.5

Crude materials for further processing ............... 17.4 21.1 –4.7 19.8 –24.6 34.9 –43.9

Foodstuffs and feedstuffs..................................... –2.6 1.6 2.8 24.9 –14.5 8.5 –2

Crude energy materials ........................................ 35.9 42.2 –15.7 16.2 –32.5 58.6 –5

Crude nonfood materials less energy .............. 20.5 5.2 17.0 15.6 –24.1 31.8 –4

Service industries.......................................................    

Total trade industries ............................................

1

) (

1

) (

1

) 3.9 7.3 5.0 2.2

Transportation and warehousing industries.

1

) (

1

) (

1

) 6.6 3.1 8.8 –5.3

Total traditional services industries..................

1

) (

1

) (

1

) 1.8 .3 .4 –.1

1 Datum is unavailable.

NOTE:  Year-over-year percentage changes for stages of processing,

and all service industry percentage changes, are not seasonally adjusted.

The 7-month and 5-month percentage changes for stages of processing

are seasonally adjusted.

climbed 24.9 percent in 2007 and another 8.5 percent 

during the first 7 months of 2008, prices for crude 

foodstuffs and feedstuffs fell 20.7 percent during the 

final 5 months of the year. The earlier increases, while 

rather broad-based, were particularly strong for grains 

and soybeans. The subsequent reversal also was widespread, with decreasing prices for raw fluid milk, grains, 

soybeans, and slaughter cattle leading the turnaround. 

Further down the production chain, the index for intermediate foods and feeds surged 17.8 percent in the 

first 7 months of 2008, outpacing a 17.2-percent jump 

in all of 2007. These gains were driven by rising prices for 

grain-based and soybean-based processed goods, such as 

prepared animal feeds, flour, and oils. In a sharp turnaround, a 13.4-percent retreat in intermediate foods and 

feeds prices during the last 5 months of 2008 mainly was 

due to falling prices for prepared animal feeds, flour, and 

dairy products. Index movements for finished consumer 

foods were less extreme. Led by higher prices for cereal 

and bakery products, beef, and oils, this index advanced 

4.9 percent during the first 7 months of 2008. Over the 

final 5 months of 2008, prices for finished consumer 

foods declined 1.4 percent in response to falling prices 

for dairy products and for fruits and melons.

In contrast to the energy and food sectors, the 2008 

index movements for the “core” sectors (sectors comprising goods other than foods and energy)5

 were not 

consistent throughout the various stages of processing. (See chart 3.) Within the category of crude nonfood materials less energy, price increases accelerated 

from 15.6 percent in 2007 to 31.8 percent in the first 7 

months of 2008. Over the remainder of the year, however, this index tumbled 42.4 percent. The turnaround 

can be traced primarily to metals prices. After prices 
PPI Highlights, 2008

24  Monthly Labor Review • July 20

 Chart 1. Energy goods by stage of processing, 2007 and 2008

15.0

12.0

9.0

6.0

3.0

0.0

–3.0

–6.0

–9.0

–12.0

–15.0

–18.0

–21.0

–24.0

80.0

60.0

40.0

20.0

0.0

–20.0

–40.0

1-month

percent change

12-month

percent change

12-month

percent change

1-month

percent change

1-month

percent change

12-month

percent change

1-month percent change 

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov D

2007                        2008

12.0

9.0

6.0

3.0

0.0

–3.0

–6.0

–9.0

–12.0

–15.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

–5.0

–10.0

–15.0

–20.0

–25.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov D

2007                        2008

12.0

9.0

6.0

3.0

0.0

–3.0

–6.0

–9.0

–12.0

–15.0

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

–5.0

–10.0

–15.0

–20.0

–25.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov D

2007                        2008

Crude energy materials

Intermediate energy goods

Finished energy goods

1-month percent change 

1-month percent change 
Monthly Labor Review • July 2009  

 Chart 2. Foods and feeds by stage of processing, 2007 and 2008

5.0

4.0

3.0

2.0

1.0

0.0

–1.0

–2.0

–3.0

–4.0

–5.0

–6.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

1-month

percent change

12-month

percent change

12-month

percent change

1-month

percent change

1-month

percent change

12-month

percent change

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov D

2007                        2008

10.0

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

2.0

1.5

1.0

0.5

0.0

–0.5

–1.0

–1.5

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov D

2007                        2008

8.0

6.0

4.0

2.0

0.0

–2.0

–4.0

–6.0

–8.0

–10.0

–12.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

–5.0

–10.0

–15.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug SepOct Nov D

2007                        2008

Crude foodstuffs and feedstuffs

Intermediate foods and feeds

Finished consumer foods

1-month percent change 

1-month percent change 

1-month percent change 
PPI Highlights, 2008

26  Monthly Labor Review • July 20

y

 Chart 3. Goods excluding foods and energy by stage of processing, 2007 and 2008

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

–0.1

–0.2

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

1-month

percent change

12-month

percent change

12-month

percent change

1-month

percent change

1-month

percent change

12-month

percent change

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov D

2007                        2008

2.5

2.0

1.5

1.0

0.5

0.0

–0.5

–1.0

–1.5

–2.0

–2.5

–3.0

–3.5

12.0

11.0

10.0

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct NovD

2007                        2008

12.0

8.0

4.0

0.0

–4.0

–8.0

–12.0

–16.0

–20.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov D

2007                        2008

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

–5.0

–10.0

–15.0

–20.0

–25.0

Crude nonfood materials less energy

Intermediate goods less foods and energy

Finished goods less foods and energy

1-month percent change 

1-month percent change 

1-month percent change 
Monthly Labor Review • July 2009  

for iron and steel scrap, nonferrous scrap, and nonferrous metal ores surged 90.6 percent, 13.7 percent, and 

14.5 percent, respectively, in the first 7 months of 2008, 

prices for the same goods dropped 66.0, 49.7, and 42.1 

percent, respectively, during the remainder of the year. 

Further down the production line, prices for intermediate goods other than foods and energy moved up at 

roughly the same rate in 2008 as they had in 2007. A 

more in-depth review, however, shows that the indexes 

for intermediate materials for manufacturing reversed 

course during the year 2008,6 whereas price increases for 

components and supplies7 accelerated in 2008, compared 

with the prior year. Similarly, prices for finished goods 

other than foods and energy rose more in 2008 than they 

had a year earlier. Examples of price acceleration in 2008 

within intermediate core goods include fabricated structural metal products, plastic products, and agricultural 

chemicals. For finished core goods, an upturn in motor 

vehicle prices, as well as larger gains in civilian aircraft 

and pharmaceutical prices, led the faster rate of advance 

in 2008. More highly processed goods commonly exhibit 

price movements that are somewhat different from price 

movements for less processed goods, since basic material costs tend to be a smaller portion of total costs for 

producers of more highly processed goods than for manufacturers of less processed goods. Also, contracts and 

escalation agreements can delay or mitigate the passthrough effect of early-stage price volatility at successive 

stages of processing.8

 

Economic downturn and shifting producer prices

The 2008 downturn in producer prices can be traced to 

sluggish demand for both extracted and manufactured 

goods. The earlier runup in prices did not have traction 

because of—at least in part—this underlying weakness, as 

demonstrated by United States Gross Domestic Product 

(GDP) figures. As economic malaise spread worldwide, 

the dropoff in production deepened and business demand continued to weaken. Following a 3.6-percent rise 

in 2004, U.S. GDP growth steadily slowed.9 From 2005 

through 2008, the annual growth rates for U.S. GDP were 

2.9, 2.8, 2.0, and 1.1 percent, respectively. Quarterly data 

for 2006 through 2008 provide additional insight into 

this slowdown. (See table 2.) Beginning in mid-2006, 

business spending on gross private domestic investment entered a general state of decline. In 2008, a drop 

in personal consumption expenditures was particularly 

noteworthy in that goods expenditures fell precipitously, 

while expenditures on services continued to inch higher. 

U.S. exports of goods also decreased at a sharp rate in 

the latter half of 2008, as an appreciating dollar made 

American goods more expensive in export markets.10

The economies of many other countries also performed poorly in 2008.11 GDP in Japan fell at 3.6-, 2.3-, 

and 12.7-percent seasonally adjusted annualized rates in 

the second, third, and fourth quarters of 2008, respectively. In the Euro Area (EA15), GDP moved down 0.3 

percent in each of the second and third quarters and 1.6 

percent in the final quarter of 2008. After a flat second 

quarter, GDP in the United Kingdom declined 0.7 percent and 1.5 percent in the third and fourth quarters, 

respectively. In China, GDP growth slowed from 10.4 

percent in the second quarter to 9.0 percent in the final 

quarter of 2008. Among developing countries as a whole, 

GDP growth was projected to be 6.3 percent for all of 

2008, compared with 7.9 percent in 2007.

The economic downturn is reflected also in weaker 

U.S. industrial production and capacity utilization data 

from the Federal Reserve.12 In the final quarter of 2007 

and first quarter of 2008, industrial production barely 

inched forward. Then, over the final three quarters of 

2008, industrial production decreased sharply: 3.4 percent in the second quarter, 8.8 percent in the third, and 

12.1 percent in the fourth. Similarly, capacity utilization, 

which was 81.3 percent in the third quarter of 2007, fell 

in each of the next five quarters to 74.9 percent at the 

end of 2008.

Energy goods

The PPI for crude energy materials tumbled 32.5 percent in 2008, following a 16.2-percent rise a year earlier. This downturn can be traced primarily to crude 

petroleum prices, which decreased 57.7 percent after 

having increased 51.7 percent in 2007. In addition, the 

natural gas index moved down 17.2 percent in 2008 

subsequent to a 4.9-percent decline in the prior year. 

In contrast, coal prices surged 28.8 percent following a 3.2-percent advance in 2007. Further along the 

production chain, retreating gasoline prices led the 

reversals in both the intermediate and finished energy goods indexes. Prices for other refined petroleum 

products—jet fuel, diesel fuel, heating oil, and residual 

fuel—also turned down in 2008. In contrast, prices for 

utility natural gas climbed after having decreased in 

2007. The indexes for both residential and commercial 

electric power moved up more in 2008 than they had 

a year earlier, while prices for industrial electric power 

rose slightly less than they had in 2007. (See table 3.)
PPI Highlights, 2008

28  Monthly Labor Review • July 20

Petroleum products. At the close of 2007, U.S. field production of crude oil was nearly flat and crude oil stocks 

had fallen 8.4 percent compared with the end of 2006. 

Supply was down to 19.0 production days from 20.6 days 

a year earlier.13 In early-to-mid 2007, the Organization 

of Petroleum Exporting Countries (OPEC) cut output 

to roughly 92.5 percent of capacity.14 As recently as the 

summer of 2005, OPEC had been producing at over 97 

The sharp decline in the equity markets during 2008 was 

primarily the result of the financial crisis, a problem that was 

triggered by the collapse of the housing boom and the resulting devaluation of mortgage-backed securities and other 

related securities held by large financial institutions. 

Throughout most of the last decade, low mortgage rates 

combined with lower lending standards and broadened offerings of subprime mortgages spurred increased demand 

for housing.1 The rise in demand was supported by a robust 

secondary mortgage market in which mortgages were pooled 

together and securitized into mortgage-backed securities. 

These securities were then purchased by large financial institutions and, in many cases, were financed with borrowed 

funds at lower interest rates than the securities were yielding. Data published by the Securities Industry and Financial 

Markets Association show that the total value of outstanding mortgage-backed securities increased by approximately 

150 percent between 2000 and 2007.2 The increased consumer demand for housing and institutional demand for 

mortgage-backed debt caused a significant and ultimately 

unsustainable appreciation in housing values. According 

to the S&P/Case-Shiller U.S. National Home Price Index, 

housing prices increased 83 percent from the first quarter of 

2000 through the second quarter of 2007. 

In 2007 and 2008, the housing market deteriorated significantly. The S&P/Case-Shiller U.S. National Home Price 

Index decreased 24 percent between the second quarter of 

2007 and the fourth quarter of 2008. As home values declined and adjustable-rate mortgages reset at higher levels, 

many borrowers defaulted on their mortgage payments. 

According to RealtyTrac, the number of foreclosure filings 

increased 194 percent between May 2006 and May 2008. 

These defaults led to large losses for the financial institutions 

holding mortgage-backed securities. Since many large insti2008 price highlights for the finance industry

tutions had purchased these securities with borrowed funds, 

the decline in the value of mortgage-backed securities led to 

an exponential decline in the value of these banks’ assets. 

As the extent of these losses gradually became more apparent in 2008, other banks began to question the viability 

of financial institutions that had bought mortgage-backed 

securities with borrowed money. As a result, the financial institutions that had made the risky purchases were unable to 

secure the short-term lending that is essential to their daily 

operations. The first major example of this was the collapse 

of Bear Stearns in March of 2008, which caused the Federal 

Reserve to broker the sale of the firm to JP Morgan Chase as 

a last-ditch effort to avoid bankruptcy. Similar resolutions 

occurred for other troubled financial institutions in the summer and fall of 2008, when Merrill Lynch, Wachovia, and 

Washington Mutual also were sold with the assistance of the 

Federal Reserve; Fannie Mae and Freddie Mac were placed 

into conservatorship; and American International Group became a company in which the Federal Government had an 

80-percent stake. 

When Lehman Brothers also neared collapse in September 2008, the government declined to intervene. The resulting bankruptcy was the largest in U.S. history.3

 Although the 

U.S. equities market had largely withstood the series of crises 

that had occurred earlier in the year, the unimpeded bankruptcy of Lehman Brothers introduced wider systemic risk 

to the financial markets. Following this collapse, the shortterm credit markets froze almost completely and there was 

a dramatic flight of capital out of equities and other riskbearing securities and into U.S. Treasuries.4

 The Dow Jones 

Wilshire 5000 index declined more than 23 percent in the 

fourth quarter of 2008 alone. Not only did the severity of the 

financial crisis become more apparent throughout the year, 

but also it worsened from the beginning to the end of 2008.

percent of capacity. The curtailments in production contributed to a 51.7-percent surge in the PPI for crude petroleum in 2007, as well as a 55.7-percent jump in the first 

7 months of 2008. In response, OPEC once again boosted 

production to nearly 97 percent of total capacity by July 

2008. The uncertain supply situation also fueled a speculative runup in prices in the crude oil futures market. Buyers 

of New York Mercantile Exchange crude oil contracts for 

1 Markus K. Brunnermeier, “Deciphering the Liquidity and Credit Crunch 

2007–2008,” Journal of Economic Perspectives, Winter 2009, pp. 77–100, on the 

Internet at www.princeton.edu/~markus/research/papers/liquidity_credit_crunch.pdf (visited July 6, 2009).

2

 “Outstanding U.S. Bond Market Debt,” Securities Industry and Financial 

Markets Association, 2009, on the Internet at www.sifma.org/research/pdf/

Overall_Outstanding.pdf (visited July 6, 2009). 

3

 Sam Mamudi, “Lehman folds with record $613 billion debt,” MarketWatch, 

Sept. 15, 2008, on the Internet at www.marketwatch.com/story/lehmanfolds-with-record-613-billion-debt (visited July 6, 2009). 

4

 Steven Mufson, “Flight to U.S. Treasury Bonds Is Bad News for the 

Economy,” The Washington Post, Dec. 2, 2008, on the Internet at www.washingtonpost.com/wp-dyn/content/article/2008/12/01/AR2008120103084.

html (visited July 6, 2009).

NOTES
Monthly Labor Review • July 2009  

Table 3. Annual percentage changes in Producer Price Indexes for selected energy goods, 2004–08

Dec. 07 Jul. 08

Index 2004 2005 2006 2007 2008 to to

Jul. 08 Dec. 08

Finished energy goods....................... 13.4 23.9 –2.0 17.8 –20.3 19.2 –33.9

Residential natural gas..................... 15.9 28.3 –11.6 –.9 6.6 33.7 –20

Gasoline................................................. 27.4 41.5 1.8 36.1 –51.4 19.2 –59

Heating oil ............................................ 42.0 41.8 5.2 30.9 –40.6 47.7 –59

Liquefied petroleum gas.................. 28.5 44.3 –15.1 59.1 –64.1 33.6 –73

Residential electric power............... 2.3 6.8 2.3 4.5 6.3 4.1 2

   

Intermediate energy goods.............. 15.8 26.2 –3.3 19.8 –21.4 25.1 –37.4

Industrial natural gas........................ 20.1 31.5 –13.2 –2.8 5.9 40.2 –24

Commercial natural gas................... 17.5 30.3 –13.6 –.9 7.1 33.1 –18

Natural gas to electric utilities....... 20.4 25.0 –16.1 –3.8 .7 38.5 –27

Diesel fuel ............................................. 37.9 46.7 2.3 33.9 –38.2 44.5 –57

Jet fuel ................................................... 45.5 41.3 6.6 41.3 –39.1 39.7 –56

Residual fuel......................................... 1.0 80.4 –23.5 38.2 –43.8 56.9 –64

Industrial electric power.................. 2.3 10.4 4.0 7.3 4.6 1.9 2

Commercial electric power............. 3.1 6.6 3.4 3.8 6.1 4.1 2

   

Crude energy goods............................ 35.9 42.2 –15.7 16.2 –32.5 58.6 –57.3

Natural gas........................................... 44.3 43.7 –26.2 –4.9 –17.2 67.7 –50

Crude petroleum................................ 30.5 49.6 .1 51.7 –57.7 55.7 –72

Coal......................................................... 10.0 9.7 5.5 3.2 28.8 25.4 2

NOTE:   Year-over-year percentage changes are not seasonally adjusted. The 7-month and 5-month percentage changes are seasonally adjusted. 

Table 2. Annual rates of change of GDP, selected components of GDP, and components of personal consumption 

 expenditures, first quarter 2005 through fourth quarter 2008 

Selected components of GDP Components of person

consumption expenditures

Year and quarter

Personal Gross private Exports Durable Nondurable consumption domestic of goods goods Services

expenditures investment goods

 2005 

Quarter 1.................. 3.0 1.7 9.1 7.1 0.6 2.4 1.7

Quarter 2.................. 2.6 3.6 –5.1 14.5 12.1 4.2 1.7

Quarter 3.................. 3.8 3.7 4.0 –.8 5.4 3.0 3.8

Quarter 4.................. 1.3 1.4 12.2 13.2 –11.7 4.7 2.5

 2006

Quarter 1.................. 4.8 4.3 6.2 18.1 18.9 4.4 1.6

Quarter 2.................. 2.7 2.8 –.4 6.7 1.8 3.1 2.8

Quarter 3.................. .8 2.2 –5.3 3.6 3.5 2.3 2.0

Quarter 4.................. 1.5 3.7 –15.0 10.4 4.2 3.1 3.9

 2007

Quarter 1.................. .1 3.9 –9.6 2.1 9.2 3.5 3.1

Quarter 2.................. 4.8 2.0 6.2 6.9 5.0 1.9 1.4

Quarter 3.................. 4.8 2.0 3.5 21.8 2.3 1.2 2.4

Quarter 4.................. –.2 1.0 –11.9 5.1 .4 .3 1.4

 2008

Quarter 1.................. .9 .9 –5.8 4.5 –4.3 –.4 2.4

Quarter 2.................. 2.8 1.2 –11.5 16.3 –2.8 3.9 .7

Quarter 3.................. –.5 –3.8 .4 3.7 –14.8 –7.1 –.1

Quarter 4.................. –6.3 –4.3 –23.0 –32.0 –22.1 –9.4 1.5

Gross

Domestic

Product

(GDP)

delivery 3 months forward, hedging against even larger 

price increases, bid up futures prices from early 2007 

through mid-2008.15 After falling to $50.58 on January 

18, 2007, the future price for a barrel of light, sweet crude 

oil steadily climbed to $78.21 by July 31 and $95.98 to 

close out 2007. After a brief respite to start 2008 ($88.11 
PPI Highlights, 2008

30  Monthly Labor Review • July 20

on February 7), futures prices surged to a peak of $145.18 

on July 14. 

In mid-2008, the underlying weakness of the U.S. 

economy and economies across the globe began to weigh 

heavily on the crude oil market. In an abrupt reversal, 

crude petroleum prices dropped 72.8 percent in the final 

5 months of 2008 to end the year 57.7 percent below 

their December 2007 level. Despite a 4.3-percent decline 

in 2008 U.S. crude oil field production, crude oil ending 

inventories grew 13.3 percent and supply expanded to 

21.9 production days. Because of the steep drop in crude 

oil prices, OPEC once again curtailed production, which 

was just over 90 percent of capacity at the end of 2008. 

By that time, however, the spot price for Cushing, OK/

West Texas intermediate crude oil had tumbled by over 

73 percent from its mid-July high, while the spot price 

for European Brent Sea crude oil decreased by more than 

75 percent. The reversal in the New York Mercantile Exchange future price for crude oil was similarly sharp: the 

price dropped 76.7 percent from July 14 (the day of the 

peak price) to December 19, with a price of $33.87 per 

barrel on the latter date.

In addition to events in the crude oil market, the economic slowdown in the U.S. drove down prices for refined petroleum products. Data from the U.S. Energy Information Administration for “total product supplied”16

show that total refined petroleum product consumption, 

at a year-over-year rate, began declining as early as mid2007.17 The early stages of this downturn were led by 

lower demand for distillate fuel (heating oil and diesel) 

and jet fuel. By early 2008, gasoline consumption also 

was falling. At the close of 2008, total product supplied 

was down 6.5 percent for refined petroleum products as a 

whole, on a year-over-year basis, with gasoline, distillate 

fuel, and jet fuel supplied falling 3.6, 9.8, and 13.0 percent, respectively. As a result, despite lower production 

in 2008 and mixed data on stocks compared with a year 

earlier, the average price of gasoline fell 59.5 percent in 

the final 5 months of 2008 to close the year 51.4 percent 

lower than it was at the end of 2007. In a similar fashion, the indexes for heating oil, diesel fuel, jet fuel, and 

residual fuel all declined sharply over the last 5 months 

of 2008 to end the year well below 2007 levels.

Natural gas products. On a calendar-year basis, the PPI 

for wellhead and pipeline natural gas has moved down 

in each of the past 3 years. Starting in September 2007 

and running through July 2008, however, wellhead and 

pipeline natural gas prices surged over 125 percent. 

The subsequent reversal in prices was similarly strong; 

a 50.6-percent decline to close out 2008 left the index 

for wellhead and pipeline natural gas 17.2 percent lower 

than in December 2007. (In price terms, the average 

dollar price per thousand cubic feet went from $5.32 in 

September 2007 to $10.62 in July 2008 and returned to 

$5.87 in December.18) In contrast, the indexes for utility natural gas—natural gas that is distributed to electric 

utilities and industrial, commercial, and residential buyers—all increased in 2008 after having fallen in 2007. 

Natural gas utilities also raised prices significantly in the 

first portion of 2008, but price reductions in the final 5 

months of the year were smaller than they were in the 

wellhead and pipeline market. The differential between 

the wellhead and pipeline price changes and the utility natural gas price changes can be attributed to supply contracts between wellhead and pipeline producers 

and purchasing utilities, to contracts between natural gas 

utilities and their customers, and to regulated rates in the 

utility sector. These agreements influence both the timing and the magnitude of price pass-through—that is, 

the amount of a price increase or decrease that is passed 

on to a subsequent level in the supply chain—in the 

natural gas market. 

The abrupt shifts in wellhead and pipeline natural gas 

prices can be traced partly to changing levels of working gas in underground storage.19 In September 2007, 

working gas in underground storage was near the top of 

its 5-year historical range and essentially identical to its 

September 2006 level, at 3,315 billion cubic feet (Bcf ). 

By March 2008, storage was near the lower end of its 

5-year range at 1,247.5 Bcf, about 22.2 percent below 

its March 2007 level. At the close of 2008, working gas 

in underground storage was once again nearing the top 

of its 5-year range, at 2,840.4 Bcf. During the runup in 

prices, both U.S. production of natural gas and U.S. consumption of natural gas grew; however, a large dropoff in 

natural gas imports occurred during the same period.20 

This reduction drove the decline in the quantity of working natural gas in underground storage. Market speculation for crude petroleum also contributed to the rapid 

swings in wellhead and pipeline natural gas prices, since 

commodity traders of crude petroleum look to wellhead 

and pipeline natural gas investments as a less expensive 

substitute for their crude petroleum positions. Consequently, large shifts in crude oil prices influenced prices 

for wellhead and pipeline natural gas. 

Liquefied petroleum gas. The index for liquefied petroleum gas fell 64.1 percent in 2008 after having risen 59.1 

percent in 2007. As was the case with most other energy 
Monthly Labor Review • July 2009  

products, a large gain in the first part of 2008 was outweighed by significant decreases during the remainder of 

the year. The category for liquefied petroleum gases includes products such as propane, ethane, butane, and isobutane. Liquefied petroleum gases can be derived from 

either natural gas or crude petroleum, and the downswing in prices for both crude oil and natural gas led to 

the fall in the liquefied petroleum gas price index.21 

Coal and electric power. The PPI for coal jumped 28.8 

percent in 2008. A majority of this advance occurred 

during the first 7 months the year, when coal prices increased 25.4 percent. Since natural gas and coal are the 

two most common fuel inputs for electric power generation and sometimes are substituted for each other, this 

rise in coal prices can be linked—at least in part—to 

higher prices for wellhead and pipeline natural gas.22 

Longer term contracts between coal producers and electricity-generating firms are common; therefore, higher 

coal prices often do not translate into higher electricity prices until contract renewals are implemented. Also, 

domestic supplies were negatively affected by coal exports, which surged 37.8 percent in 2008 to 81.5 million 

short tons, as well as coal imports, which edged down 5.9 

percent to 34.2 million short tons.23 

Further down the chain of production, the PPI for 

electric power moved up 5.8 percent in 2008 after having risen 4.9 percent a year earlier. Prices for residential and commercial electric power advanced at faster 

rates in 2008, while the index for industrial electric 

power increased at a modestly slower rate than it had 

in 2007. Higher prices for coal and volatility in the 

crude petroleum and natural gas markets resulted in reduced electricity generated from petroleum and natural 

gas.24 Overall, net electricity generation fell 1.0 percent 

in 2008. Interestingly, net generation from renewable 

sources25 jumped 17.3 percent to account for 3.0 percent 

of total net generation at the end of 2008. Over the last 

3 calendar years, total electricity generation from renewable resources has climbed 41.7 percent.26 

Foods and related products

The PPI for finished consumer foods rose 3.2 percent in 

2008 following a 7.6-percent advance in 2007. Accounting for this slowdown, the indexes for natural, processed, 

and imitation cheese; fresh vegetables, except potatoes; 

eggs for fresh use; fluid milk products; and fresh fruits 

and melons turned down in 2008. In contrast, price increases accelerated from 2007 to 2008 for beef and veal, 

bakery products, and confectionery end products. (See 

table 4.)

At the earlier stages of processing, prices for intermediate foods and feeds increased 2.0 percent in 2008 

Table 4. Annual percentage changes in Producer Price Indexes for selected foods and related products, 2004–08

Index 2004 2005 2006 2007 2008

Finished consumer foods.....................................     3.1 1.7 1.7 7.6 3.2

Beef and veal products......................................     –3.8 3.2 –8.3 2.6 

Confectionery end products............................     7.2 2.8 –1.0 3.2 1

Bakery products...................................................     2.1 2.4 4.0 5.1 1

Natural, processed, and imitation cheese ...     14.0 –7.7 –3.1 32.1 –

Fluid milk products.............................................     5.0 1.0 –1.4 25.9 –

Fresh fruits and melons.....................................     18.0 –12.2 29.5 6.5 –2

Fresh vegetables, except potatoes................     –22.2 39.7 –11.2 14.6 –2

Eggs for fresh use ................................................     –29.4 5.0 22.2 56.4 –2

     

Intermediate foods and feeds............................     –2.3 2.4 4.7 17.2 2.0

Prepared animal feeds ......................................     –11.1 5.6 11.8 20.1 

Shortening and cooking oils...........................     .2 –3.3 11.0 25.4 

Processed eggs....................................................     –7.3 3.5 .5 48.2 

Flour.........................................................................     4.9 2.6 11.9 55.6 –2

     

Crude foodstuffs and feedstuffs........................     –2.6 1.6 2.8 24.9 –14.5

Wheat......................................................................     –5.0 –1.0 22.3 109.0 –4

Soybeans................................................................     –29.7 7.0 7.9 76.8 –2

Raw fluid milk .......................................................     19.1 –9.8 –4.7 52.4 –2

Corn .........................................................................     –22.9 .7 79.2 21.5 –2

Slaughter cattle....................................................     –10.9 9.5 –9.8 8.2 –1

Slaughter hogs.....................................................     48.7 –14.7 –4.4 –12.4 

Slaughter chickens..............................................     4.3 –7.3 3.8 9.3 2
PPI Highlights, 2008

32  Monthly Labor Review • July 20

Milled rice prices faced a roller coaster of a year in 2008. 

The PPI for milled rice set an all-time record in February that 

it then broke in each of the next 5 succeeding months, reaching its peak in July. After the runup in prices during the first 

half of the year, record production helped push prices lower 

over the final 5 months of 2008, but by the end of the year 

the PPI for milled rice had only dropped 15 percent from its 

midyear high, mainly because of restrictive trade policies.

In the overall U.S. agricultural economy, rice is a relatively 

minor crop. It is usually ranked eighth among field crops 

in regard to both value of production and planted acreage.1

However, it is an important crop both locally and regionally; the production and milling of rice are concentrated in 

four main regions.2 One interesting aspect of U.S. rice is how 

international prices, mainly those from Thailand and Vietnam, affect domestic prices. Although the United States is 

not a significant producer of rice, it also is not a significant 

consumer of rice, so almost half of the rice produced in the 

country is exported; U.S. rice exports consist of between 12 

and 14 percent of world rice trade, which usually ranks the 

United States as the third or fourth largest exporter of milled 

rice.3 Domestic prices, therefore, are affected substantially 

by international events, particularly those in Asia, which accounts for 90 percent of global rice consumption according to 

the U.S. Department of Agriculture (USDA). In Asia, rice is 

the staple food for billions of people, and worldwide it is the 

second-most consumed cereal grain after maize.

One major factor contributing to higher rice prices in 

the first half of 2008 was the increase in fuel and fertilizer 

prices, both of which reached then-record highs during the 

planting cycle in early 2008.4 Relative to other domestically 

grown field crops, rice is especially fuel- and fertilizer-intensive, making producers particularly vulnerable to rising crude 

oil costs.5 Another factor that pushed up rice prices was the 

increase in the prices of other agricultural commodities such 

as wheat, corn, and soybeans. In some areas, rice competes for 

acreage with these crops; as a result, rice price increases kept 

pace with those of other agricultural commodities. Additionally, in many parts of the world, consumers shift between 

rice-based and wheat-based foods according to price and 

availability.6 However, of greater importance for rice prices in 

early 2008 was the declining value of the dollar throughout 

that period.7 According to the USDA, most of the rice trade is 

denominated in dollars, meaning that a drop in the value of 

the dollar increases most rice prices. It is important to note 

that, despite the rapid increases in the price of rice, world rice 

production in 2008 was projected by both the USDA and the 

Food and Agriculture Organization of the United Nations to 

be at record levels, and U.S. production was projected to hit 

a 3-year high.8

Wild ride for milled rice in 2008

Although higher production costs, increased prices for other agricultural commodities, and the devaluation of the dollar 

were all underlying contributors to the increase in world rice 

prices, the main factor was a combination of export bans and 

regulations put in place by the major rice-producing nations. 

Rice has traditionally been a commodity that is consumed 

in the country where it is produced, usually with no more 

than 10 percent of its production marked for export. In 2008, 

worldwide rice exports as a percentage of world rice production were 6.7 percent, which was below the corresponding 

figures for corn (10–12 percent), wheat (18 percent), and 

soybeans (30 percent).9 The fact that such a small percentage 

of rice is sold on the international market leads to increased 

price volatility, especially in the face of supply shocks generated by export bans and regulations. After India and Vietnam 

imposed partial export bans in October 2007, China, Egypt, 

and Cambodia all announced programs to restrict their exports in order to make more rice available in their domestic 

markets at relatively stable prices. Thailand, the world’s largest 

rice exporter, recorded lower exports in early 2008 due to the 

government’s domestic procurement and storage program.10 

By late April 2008, price quotes for Thailand’s high-quality 

long-grain rice had more than doubled from the beginning 

of the year to $993 per ton, a record in nominal dollar terms 

(that is, without adjusting for inflation).11 The various export 

bans led to panic buying by a number of large importers, most 

notably the Philippines and flood-ravaged Bangladesh.

The beginnings of the worldwide financial crisis in August resulted not only in a precipitous drop in agricultural 

prices effected primarily by reduced demand, but also in an 

appreciation of the U.S. dollar, which put further downward 

pressure on rice prices. In November, the Food and Agriculture Organization announced that in 2008, for the fourth 

consecutive year the size of the world’s rice crop would hit a 

record high.12 The Food and Agriculture Organization projected production increases for Bangladesh, China, Pakistan, 

Vietnam, Thailand, India, the Philippines, and several countries in Sub-Saharan Africa. These robust forecasts helped to 

soothe the international rice market, in which prices continued their downward trend and arrived at levels more in line 

with historical norms.13 This slide in prices was dampened, 

however, primarily by trade restraints in Egypt and India and 

by government stockpiling in Thailand.14 As such, through 

the end of the year prices for milled rice remained higher 

than those of other agricultural commodities.

NOTES

1 Rice Backgrounder, RCS–2006–01 (U.S. Department of Agriculture, December 2006), p. 3. 2 Ibid.
Monthly Labor Review • July 2009  

after having climbed 17.2 percent in the previous year. 

The indexes for prepared animal feeds and for shortening and cooking oils also rose less than they had in 2007. 

Prices for flour; fluid milk products; natural, processed, 

and imitation cheese; and processed eggs turned down in 

2008. By contrast, prices for refined sugar and byproducts turned up in 2008, and the indexes for beef and veal 

and milled rice increased more than they had in 2007. 

The PPI for crude foodstuffs and feedstuffs fell 14.5 

percent in 2008, compared with a 24.9-percent gain in 

2007. This reversal is attributable to downturns in prices 

for raw fluid milk, wheat, soybeans, corn, and slaughter cattle. In contrast, prices for slaughter chickens advanced more in 2008 than a year earlier, and the index 

for slaughter hogs turned up after having fallen in 2007.

Raw fluid milk and processed dairy products. Raw fluid 

milk prices fell 27.4 percent in 2008 after having surged 

52.4 percent in the previous year. Milk production per 

dairy cow rose 1.0 percent from 2007 to 2008.27 After 

milk prices rose to record levels in 2007,28 milk producers increased their dairy herd sizes in an attempt to take 

advantage of the higher prices. However, the increased 

numbers of dairy cattle, producing more milk on average per cow than in 2007, resulted in increased supply 

and lower milk prices in 2008.29 Additionally, raw milk 

prices declined in the latter half of 2008 as a result of the 

worldwide financial crisis, as demand from dairy product 

manufacturers such as bottled milk, cheese, and butter 

producers declined late in the year.

The index for processed fluid milk products moved 

down 7.7 percent in 2008 after having jumped 25.9 

percent in the previous year, and prices for natural, processed, and imitation cheese declined 5.9 percent subsequent to having advanced 32.1 percent in 2007. Prices 

for processed fluid milk products closely follow the price 

of the primary raw material, raw fluid milk. Larger milk 

supplies also translated into lower prices in 2008 for 

natural, processed, and imitation cheese. 

Vegetables and fruits. The PPI for fresh vegetables, except potatoes, dropped 23.8 percent in 2008, following a 

14.6-percent increase a year earlier. This index was volatile throughout 2008 in response to fluctuating weather 

conditions throughout the United States. A January 

freeze in Florida damaged tomato, eggplant, and squash 

crops, severely reducing crop yields.30 The freeze drove 

prices higher when these crops were due for harvest in 

March. By late spring, however, prices had declined as 

growing conditions became favorable in both the East 

and the West. The index for fresh vegetables, except potatoes, moved up again in June because of higher prices 

for lettuce in California caused by high temperatures that 

reduced yields in the Salinas and Santa Maria growing 

areas.31 Above-average temperatures also hit the Southeast, decreasing quality (mainly by causing some heavy 

scarring) and lowering yields of eggplant, squash, and 

cucumbers. In July and August, vegetable prices dropped 

roughly 25 percent in response to falling tomato prices, 

which declined by over 50 percent during this period. A 

salmonella warning from the Food and Drug Administration advised consumers not to eat raw red Roma, raw 

red plum, or raw red round tomatoes, or products that 

contain these types of raw red tomatoes.32 Consequently, 

demand for tomatoes and tomato products fell shortly 

after the announcement; and by August, vegetable prices 

had reached their lowest point for the year. Prices rose 

from September to November as the fall growing season 

took over and vegetable supplies shrank. Finally, prices 

declined in December because of weak demand for lettuce, broccoli, cauliflower, and carrots following Thanksgiving.

3

 Ibid, p. 6–8.

4

 “What’s Behind the Surge in Global Rice Prices?” Amber Waves, U.S. 

Department of Agriculture, September 2008, p. 3.

5 Rice Backgrounder, RCS–2006-01.

6

 “What’s Behind the Surge in Global Rice Prices?”

7

 Donald Greenlees, “As the Dollar Slides, Two Continents Feel the Side 

Effects in Divergent Ways,” The New York Times, March 27, 2008, B1.

8 Rice Outlook, RCS–08k (U.S. Department of Agriculture, December 

2008).

9 U.S. Rice Industry: Background Statistics and Information (U.S. Department of Agriculture, April 2008).

10 Food Outlook (United Nations Food and Agriculture Organization, 

November 2008), p. 23, on the Internet at www.fao.org/docrep/011/

ai474e/ai474e05.htm (visited July 17, 2009).

11 Thailand Weekly Rice Price Update (U.S. Department of Agriculture, 

May 2, 2008).

12 Food Outlook, www.fao.org/docrep/011/ai474e/ai474e05.htm.

13 Ibid.

14 Ibid.

Notes—Continued —Wild ride for milled rice in 2008
PPI Highlights, 2008

34  Monthly Labor Review • July 20

The PPI for fresh fruits and melons fell 20.3 percent in 

2008, after having increased by 6.5 percent a year earlier. 

In December 2007, the index for fresh fruits and melons 

had reached its highest level since July 1991,33 a phenomenon led by a steep runup in strawberry prices. After 

increasing in January 2008, the fresh fruits and melons 

index fell for 3 consecutive months (by 14.4 percent in 

total) as California crops of navel oranges, grapefruits, 

tangerines, tangelos, and lemons recovered from a devastating freeze that had occurred in January 2007.34 After 

rising in May 2008, prices again decreased for the next 

3 months—by 16.1 percent in all—an event driven by 

price declines for stone fruits (especially peaches, plums, 

prunes, nectarines, and cherries) and berries (especially 

strawberries, raspberries, blueberries, and blackberries). 

After bottoming in October, the index for fresh fruits 

and melons increased in November and December, 

mainly because of higher strawberry prices, as the transition from the west coast crop to the east coast crop was 

delayed by cool temperatures in Florida.35

Grains, soybeans, and prepared animal feeds. Prices for 

grains fell 29.1 percent in 2008 after having risen 59.2 

percent in 2006 and 40.8 percent in 2007. The 2008 decline was primarily the result of a 45.5-percent decrease 

in wheat prices and a 24.0-percent drop in corn prices. 

On March 31, 2008, the U.S. Department of Agriculture 

(USDA) report Prospective Plantings estimated that the 

total area of planted wheat would be six percent higher 

in 2008 compared with 2007.36 Later projections from 

the USDA and the Food and Agriculture Organization 

of the United Nations estimated that worldwide wheat 

production would be a record 684 million tons in 2008.37

The weakening economy, which led to an overall decline 

in prices of other commodities (corn, soybeans, and oil, 

among others), and a stronger U.S. dollar also contributed 

to lower wheat prices. In late 2008, the global economic 

crisis pushed wheat prices down further as international 

demand fell by over 50 percent.38 

Similar to wheat prices, corn prices also turned 

down—falling 24.0 percent in 2008. Prices began dropping in midsummer because of an increase in the projected size of the harvest, and they gained downward 

momentum in September as the global economic crisis 

began to take hold. Along with stock prices, commodities prices fell as the financial meltdown gripped the 

world, and a strengthened dollar reduced demand in 

other countries for goods imported from the United 

States. Also, corn prices tend to fall in the fourth quarter of the year after the U.S. harvest is complete, when 

supply levels are typically at their highest.39

The PPI for soybeans fell 29.8 percent in 2008, after 

having climbed 76.8 percent a year earlier. Soybean prices 

declined for the same reasons as corn prices. Although they 

rose during the first of half of 2008, soybean prices started 

to fall sharply midyear when USDA production and supply 

data came into focus.40 In September, prices plummeted 

when the global financial turmoil began in earnest.

The rate of increase in the prepared animal feeds index 

slowed to 7.3 percent in 2008 from 20.1 percent in 2007. 

This slowdown was the result of lower prices for principal feed ingredients—corn, soybeans, and wheat—which 

were passed on to producers of prepared animal feeds.

Slaughter cattle and beef and veal. The index for slaughter cattle turned down 10.0 percent in 2008, following 

an 8.2-percent advance a year earlier. Most of the 2008 

decline occurred late in the year, because prices were 

supported through August by strong export demand for 

both beef and cattle, largely because of the weak dollar. In 

August 2008, beef and veal exports were up 66.5 percent 

over 2007 year-to-date levels.41 Additionally, the effects 

of the weak dollar made foreign beef more expensive for 

U.S. consumers, decreasing import demand and bolstering prices in the U.S. beef and cattle markets. After posting a 5-year high in August,42 the slaughter cattle index 

tumbled—falling 2.1 percent in September, 10.3 percent 

in October, and 8.9 percent in December. This downturn in prices was attributable to the strengthening of 

the U.S. dollar and to the economic crisis that occurred 

in the latter half of 2008. Unfavorable global economic 

conditions caused an overall decrease in global demand 

for beef, pushing prices even lower. According to the U.S. 

Meat Export Federation, after enjoying strong growth in 

a number of foreign markets (notably Japan, Vietnam, 

and Russia in addition to traditional partners Mexico 

and Canada) through August 2008, U.S. beef and pork 

exports faced slackening demand conditions by autumn 

due to “limited credit availability, volatile currency exchange rates, and global economic uncertainty.”43

The PPI for beef and veal advanced 6.2 percent in 

2008 after having risen 2.6 percent in 2007. As with the 

slaughter cattle index, prices for beef and veal increased 

steadily through early and mid-2008, driven by high 

export and low import demand.44 The weakness of the 

U.S. dollar increased foreign demand for beef and other 

agricultural products, allowing trade partners to enjoy 

favorable terms of trade and cheaper prices. Similar to 

slaughter cattle prices, the beef and veal index experienced late-year declines in conjunction with the global 
Monthly Labor Review • July 2009  

economic turmoil. As opposed to the decrease in the 

slaughter cattle index, however, the decrease in the beef 

and veal index was not enough to offset the increases 

from earlier in 2008. 

Chicken eggs. Prices for eggs for fresh use declined 25.8 

percent in 2008, following a 56.4-percent jump in 2007. 

Likewise, the index for processed eggs edged down 0.7 

percent in 2008 after having risen 48.2 percent a year 

earlier. Prices for feed corn and prepared poultry feed 

began a steep downturn in the latter portion of 2008. 

Feed costs, which represent more than half of the cost of 

egg production, are typically passed on to buyers. Corn 

supplies remained strong in 2008 because of a combination of high inventory levels at the start of the year and 

the second-highest level of planted acreage on record.45

Flour. The index for flour fell 20.9 percent after having climbed 55.6 percent in 2007. Flour prices hit their 

peak in March 2008 and steadily declined over the remainder of the year. Trends in the price of flour usually 

mirror price trends of wheat. World wheat production 

was estimated to have increased by 12.0 percent in 2008, 

a record.46 As a result, wheat prices dropped from their 

record level and dragged down flour prices with them. 

The high level of worldwide wheat production decreased 

U.S. trade opportunities, which kept more supplies of 

wheat and flour in the domestic market.

Cooking oils. Prices for shortening and cooking oils advanced 4.3 percent in 2008 after having climbed 25.4 

percent in the previous year. Prices for oilseed commodities such soybeans, cottonseeds, and sunflowers jumped 

dramatically in the first part of the year. Farmers switched 

acreage previously reserved for oilseeds to corn in order 

to profit from historically high corn prices. In the second 

half of the year, however, the prospects for a good harvest 

put downward pressure on oilseed commodity prices. 

Additionally, the global financial crisis caused commodity prices to fall even further and caused demand (both 

domestic and foreign) for cooking oil products to diminish. This resulted in a rapid decline in prices in the second half of the year, although not enough to completely 

offset the gains from early in the year. 

Finished goods other than foods and energy

The advance in the PPI for finished goods other than 

foods and energy, commonly known as the finished core 

index, accelerated to 4.5 percent in 2008 from 2.0 percent in 2007. (See table 5.) In 2008, the index for motor vehicles turned up 3.6 percent after having fallen 0.7 

percent in the previous year. Prices for malt beverages 

also rose following decreases in 2007. The indexes for 

civilian aircraft, soap and synthetic detergents, consumer 

plastic products, household furniture, and pet food increased more than they had in the prior year. By contrast, 

the rise in the index for cigarettes slowed to 2.8 percent 

from 9.2 percent in 2007.

Motor vehicles. The index for motor vehicles moved up 

3.6 percent in 2008 following a 0.7-percent decline in 

2007. Leading the upturn, prices for passenger cars and 

light trucks increased 3.7 and 3.5 percent, respectively, 

after having decreased in the previous year. Motor vehicle prices dropped 3.0 percent from December 2007 

to September 2008, as manufacturers discounted 2008 

model-year vehicle prices prior to introducing 2009 

model-year vehicles. When new models were introduced into the index in October, prices for motor vehicles jumped 7.7 percent. With this introduction, the 

index for passenger cars rose 4.2 percent and the index 

for light trucks increased 11.4 percent. Much of this increase was the result of automakers’ input material supply contracts, which locked them into purchasing steel 

and aluminum at the relatively high prices reached in 

late summer of 2008. Additionally, late in the year, the 

appeal of cargo space and power, combined with lower 

fuel prices and improved efficiency, renewed demand for 

trucks and placed upward pressure on prices. The motor vehicle price increases were considered surprising 

by some, given an overall 18.1 percent drop in domestic 

vehicle sales for 2008, but automakers, desperate for cash 

to cover their fixed costs, kept prices at relatively high 

levels in order to capture as much revenue as possible.47

Civilian aircraft. Civilian aircraft price increases accelerated to 7.3 percent in 2008 from 3.3 percent in the 

prior year. In 2007, airlines began updating fleets, most 

of which had been aging since 2001.48 At the beginning 

of 2008, it was reported that aircraft manufacturers had 

enough production orders to last 5 years.49 In addition 

to strong demand, rising input costs for steel and aluminum placed upward pressure on civilian aircraft prices. 

Aircraft manufacturers tend to engage in long-term 

contracts, so higher input prices earlier in the year continued to have an effect on aircraft manufacturers even 

as the economy declined and market prices for steel and 

aluminum fell later in the year. 
PPI Highlights, 2008

36  Monthly Labor Review • July 20

Soap and synthetic detergents. The index for soap and 

synthetic detergents jumped 11.1 percent following a 

1.0-percent gain in 2007. Higher export demand due 

to the weak U.S. dollar, and a slow reaction to declining energy costs, drove the steady increase in this index. 

Chemical production is an energy-intensive process; 

therefore, soap and detergent inputs were affected by the 

peak in energy prices in mid-2008. As a result of longterm contracts, high energy prices early in the year caused 

larger-than-average increases later in the year. Prices for 

alkalies and chlorine, prime ingredients in cleaners used 

to remove dirt without excess scrubbing, climbed 47.3 

percent. The index for surfactants—ingredients used to 

amplify the spreading and wetting properties of water—

rose 11.1 percent. 

Cigarettes. The index for cigarettes moved up 2.8 percent in 2008, compared with a 9.2-percent advance in the 

previous year. After no change in the first 3 months of 

2008, cigarette prices increased in April and May mainly 

because of tobacco companies concluding their annual 

Master Settlement Agreement payments for 2008.50 

Master Settlement Agreement payments are mandated 

compensation that tobacco companies must pay to help 

Federal and State governments cover tobacco-related 

health-care costs and smoking prevention efforts. The 

index also edged up in September because some States 

crafted legislation that blocks illegal online sales of tobacco to minors, sales that were undercutting tobacco 

prices in stores.51

Intermediate goods other than foods and energy

The PPI for intermediate materials less foods and energy 

rose 2.9 percent in 2008, slightly less than its 2007 increase of 3.3 percent. In 2008, higher prices for materials and components for construction outweighed lower 

prices for materials for both durable and nondurable 

manufacturing. (See table 6.) The 2008 increase in intermediate core prices was the smallest calendar-year 

advance since a 2.1-percent rise in 2003.

Materials and components for construction. The rise in 

the PPI for materials and components for construction 

accelerated to 7.5 percent in 2008 from 2.0 percent in 

2007. The index for fabricated structural metal products 

increased 12.7 percent after having advanced 2.3 percent in the previous year. Prices for paving mixtures and 

blocks, asphalt felts and coatings, plastic products, and 

cast iron pressure and soil pipe and fittings also rose more 

than in 2007. The index for gypsum products turned up 

in 2008 after having fallen in the prior year. By contrast, 

the index for nonferrous metals turned down 21.6 percent after having risen 3.9 percent in 2007. Despite a 

9.8-percent drop in private construction in 2008, public 

construction increased 7.2 percent, to a record $307.8 

billion.52

The index for fabricated structural metal products rose 

steadily during the first 9 months of 2008 before declining in the final 3 months of the year. This index is mainly 

influenced by prices for steel, the main input. Steel prices 

typically affect the fabricated structural metal products 

index with a lag because of the time it takes steel to move 

through the stages of production. Steel prices surged in 

the first half of the year because of high demand for 

construction, especially in developing nations. In recent 

years, countries such as China, India, and Thailand have 

been building up infrastructure to support their expanding industrial sectors. China, the largest consumer of 

steel, accounts for 35 percent of total world steel use, 

according to the International Iron and Steel Institute.53

This institute also reported that at least 3 million tons of 

Table 5. Annual percentage changes in Producer Price Indexes for selected finished goods other than foods and energy, 

 2004–08

Index 2004 2005 2006 2007 2008

Finished goods other than foods and energy.............. 2.3 1.4 2.0 2.0 4.5

Pet food................................................................................. 7.3 1.0 3.3 6.0 1

Soap and synthetic detergents...................................... 1.1 1.6 6.6 1.0 1

Consumer plastic produc............................................ 8.3 8.4 3.6 3.3 9.3

Civilian aircraft .................................................................... 7.1 3.9 5.3 3.3 

Household furniture.......................................................... 3.5 3.7 2.1 1.2 

Malt beverages.................................................................... .1 6.0 –.4 –.8 

Cigarettes.............................................................................. 1.1 4.8 .8 9.2 

Motor vehicles..................................................................... 1.5 –3.8 .9 –.7 

1 Currently PPI code 072B. Formerly PPI code 072
Monthly Labor Review • July 2009  

steel were used to build the stadiums and make necessary infrastructure improvements for the 2008 Summer 

Olympics in Beijing.54 By the end of the year, slowdowns 

in the construction and automotive sectors caused demand for steel to greatly diminish. Consequently, the 

index for fabricated structural metal products declined 

over the last 3 months of 2008, although not enough to 

offset record-high prices reached earlier in the year. 

Materials for durable manufacturing. The index for 

materials for durable manufacturing turned down 5.1 

percent in 2008 after having risen 1.7 percent in 2007. 

The index for nonferrous metals dropped 21.6 percent 

following a 3.9-percent increase in the previous year. 

Prices for plastic resins and materials and primary basic 

organic chemicals also turned down in 2008 after having 

advanced a year earlier. The index for cold rolled steel 

sheet and strip fell more than it had in 2007, while prices 

for semifinished steel, hot rolled steel sheet and strip, 

and hot rolled steel bars, plates, and structural shapes 

rose less than in the prior year. In 2008, the slowing 

economy led to lower demand for many materials for 

durable manufacturing, negatively affecting prices.

The index for primary nonferrous metals fell 29.8 

percent in 2008 subsequent to a 3.9-percent increase 

in 2007.55 This was a dramatic downward turn from the 

annual gains of the preceding 6 years. Mainly because 

of production-cost pressure, primary nonferrous metal 

prices increased 17.5 percent from December 2007 to 

May 2008. According to the U.S. Geological Survey’s 

annual Mineral Commodity Summaries report, recordlow inventories and labor issues in the beginning of the 

year led to higher prices for copper and a ramping up of 

copper production.56 Aluminum prices jumped early in 

the year because of rising energy costs linked to updated 

electric power contracts affecting aluminum producers 

in China—the world’s largest producer.57 These new 

contracts had a significant impact on prices because energy is a major input to aluminum production. Later, the 

index fell rapidly because of pressure from surplus materials and slumping demand. When energy prices turned 

down, signaling an economic slowdown, Chinese aluminum producers attempted to prevent a surplus by making major production cuts in October, but to no avail.58

Table 6. Annual percentage changes in Producer Price Indexes for selected intermediate goods other than foods and energy, 

 2004–08

Index 2004 2005 2006 2007 2008

Intermediate goods other than foods and energy.............. 8.3 4.8 4.5 3.3 2.9

Materials and components for construction...................... 10.1 6.1 4.3 2.0 

Asphalt felts and coatings..................................................... 4.1 15.3 5.0 1.

Cast iron pressure and soil pipe and fittings................... 21.6 3.7 9.4 3.

Paving mixtures and blocks.................................................. 4.3 14.3 27.6 1.

Prefabricated metal buildings.............................................. 35.5 2.0 5.5 2.

Fabricated structural metal products................................ 17.6 2.9 4.7 2.

Gypsum products..................................................................... 20.0 18.8 5.5 –22

Plastic products........................................................................ 6.1 11.0 1.1 1

   

Materials for nondurable manufacturing............................ 13.7 8.9 1.2 12.8 –

Industrial chemicals ................................................................ 24.6 13.6 4.0 16.3

Primary basic organic chemicals...................................... 44.0 22.3 –1.6 2

Basic inorganic chemicals .................................................. 7.3 17.7 16.4 

Inedible fats and oils............................................................... –15.6 11.9 12.4 48.9

Plastic resins and materials................................................... 28.6 10.8 –7.8 9.

Paper ............................................................................................ 6.1 5.0 4.7 1

Rubber and rubber products................................................ 5.1 6.2 4.0 2.

Medicinal and botanical chemicals.................................... –1.8 2.3 1.2 1.

Agricultural chemicals and chemical products.............. 8.2 8.9 –3.0 24.

Materials for durable manufacturing..................................... 18.3 5.9 12.5 1.7 –5

Nonferrous metals................................................................... 17.8 18.4 26.1 3.9

Steel mill products................................................................... 48.8 –3.8 11.6 

Steel pipe and tube .............................................................. 66.0 1.2 5.5 

Semifinished steel mill products...................................... 83.6 3.5 3.

Hot rolled steel bars, plates, and structural shapes... 53.8 –1.0 7.

Hot rolled steel sheet and strip ........................................ 28.8 –13.9 8.

Cold rolled steel sheet and strip....................................... 35.5 –1.2 41.2 –

Prepared paint........................................................................... 4.0 7.9 5.3 3.
PPI Highlights, 2008

38  Monthly Labor Review • July 20

Falling demand from the construction sector and motor 

vehicle manufacturers, the main users of primary nonferrous metal products, pushed prices lower through the 

end of 2008.

Materials for nondurable manufacturing. The index for 

materials for nondurable manufacturing turned down 5.2 

percent in 2008 after having risen 12.8 percent in 2007. 

The index for primary basic organic chemicals dropped 

51.2 percent after having increased 27.8 percent in the 

prior year. Prices for plastic resins and materials and 

for inedible fats and oils also fell in 2008 after having 

risen a year earlier. By contrast, prices for basic inorganic 

chemicals, agricultural chemicals and chemical products, 

paper, medicinal and botanical chemicals, and rubber 

and rubber products rose more than in the prior year.

The downturn in the index for primary basic organic 

chemicals can be attributed to falling crude petroleum 

prices, since primary basic organic chemicals are made 

from a petroleum refining process. Prices for crude petroleum, like those of other energy materials in 2008, 

grew substantially in the first half of the year before 

falling at a rapid rate in the second half of the year. In 

addition, chemicals are purchased as inputs by manufacturers of plastics, rubber, and fibers. Demand for organic 

chemicals was severely affected by the economic downturn, with the resulting buildup of chemical inventories 

placing severe pressure on prices. 

Crude nonfood materials less energy

The PPI for crude nonfood materials less energy turned 

down 24.1 percent in 2008 after having risen 15.6 percent in 2007. (See table 7.) The 2008 decrease for basic 

industrial materials was the first calendar-year decline 

since a 9.9-percent drop in 2001. The slowing economy 

contributed significantly to the downturn in prices for 

basic industrial materials by eroding demand. In 2008, 

the index for iron and steel scrap fell 35.2 percent after having increased 29.4 percent in the preceding year. 

Prices for nonferrous metal ores, wastepaper, soybeans, 

and raw cotton also turned down in 2008 after having 

gone up in the prior year. By contrast, the rise in the 

index for phosphates jumped to 87.3 percent from 52.0 

percent in 2007. Prices for wood chips also advanced 

more than they had in the prior year.

Iron and steel scrap. Prices for iron and steel scrap 

turned down 35.2 percent in 2008 after having risen 

29.4 percent in 2007. Prices for iron and steel scrap, like 

those of many commodities, experienced a bubble that 

grew quickly through the first half of 2008. When this 

trend reversed course, rapid declines dominated the latter half of the year. Before the downturn began, the index 

rose 90.6 percent over the first 7 months of 2008. Iron 

and steel scrap prices then plummeted in September, 

October, and November—69.7 percent in total—mainly 

because of the retracting global economy. Iron and steel 

scrap are melted and reformed into new steel products 

that are used primarily by the construction and automotive industries. These sectors succumbed to the economic 

malaise of the latter half of 2008, leading to a dramatic 

drop in demand for steel. The U.S. Geological Survey 

reported that buyers in Asia and Europe cancelled many 

orders, leading to oversupply. Despite an attempt to relieve oversupply by slashing steel mill utilization to 71 

percent in October, which led to an increase in ferrous 

scrap prices in December, the index closed 2008 well below its level from the end of 2007.59

Wastepaper. Wastepaper prices moved down 55.1 percent in 2008, compared with a 53.4-percent jump in the 

previous year. Products in this index are recycled and 

later sold as recycled paper and cardboard. China, as well 

Table 7. Annual percentage changes in Producer Price Indexes for selected crude nonfood materials less energy, 2004–08 

Index 2004 2005 2006 2007 2008

Crude nonfood materials less energy................................ 20.5 5.2 17.0 15.6 –24.1

Wastepaper ........................................................................... 17.3 –9.1 19.1 53.4 

Iron and steel scrap ............................................................ 50.8 –10.8 2.9 29.4 

Soybeans................................................................................ –29.7 7.0 7.9 76.8 

Nonferrous metal ores....................................................... 49.9 26.2 31.3 10.8 

Raw cotton ............................................................................ –35.5 16 2.9 20.1 

Pulpwood............................................................................... –3.0 –.3 5.0 –1.

Construction sand, gravel, and crushed stone .......... 4.3 7.7 9.3 8.

Wood chips............................................................................ 2.4 3.9 26.7 .

Phosphates............................................................................ 12.7 5.0 1.2 52.0
Monthly Labor Review • July 2009  

The importance of recycling to the steel industry should 

not be understated. In 2007, more than three quarters of 

domestic steel production was derived from recycled scrap.1

Typically, the savings achieved by using scrap for steel manufacturing are substantial. For this reason, in the 1990s there 

was a revolution in steel production brought about by the 

adaptation of Electric Arc Furnace (EAF) technology for 

the manufacture of flat rolled steel products. The superior 

cost structure of EAFs over traditional blast furnaces (EAFs 

are smaller and, because they rely upon ferrous scrap, also 

cheaper to operate) led to an expansion of steel production 

around the world.

A variety of forces pushed world steel production to record levels in 2008. Some trends had been emerging for more 

than a decade; the collapse of the Soviet Union, for example, 

resulted in the birth of a massive ferrous scrap export industry. However, between 2002 and 2007, Russia enacted several 

policies both to reduce scrap exports and to channel exports 

through port facilities in Russia instead of those in Ukraine.2

The result was a sizable cut in Russian scrap exports at the 

same time that Middle Eastern steel production was taking 

off in such places as Egypt and Turkey, servicing the oil-state 

construction booms.

Meanwhile, American steel makers, who had been unified 

in predictions of bankruptcy and pleas for Federal protection in 2001, began seeing healthy profits. Industry optimism 

was boosted by increasing consolidation that provided much 

needed pricing power. A vital factor giving heart to American ferrous scrap producers was the sharp depreciation of 

the American dollar relative to other major currencies. The 

dollar’s depreciation made American scrap metal more attractive to foreign buyers, which in turn helped spur production of U.S. steel. Thus, both steel and ferrous scrap producers 

were confident striding into 2008, even in the face of warning 

signs in such sectors as housing and automobiles. In December 2007, the Producer Price Index for iron and steel scrap 

stood at an all-time high, a level that was then exceeded in 

each of the first 7 months of 2008; the index soared 91 percent from January to July.

During this period ferrous scrap markets saw extreme 

price hikes due to tight global supplies, as demand for steel 

grew faster than the supply of ferrous scrap inputs. As the 

U.S. dollar fell to almost 60 percent of the value of the Euro, 

American steel makers not only managed to push imports 

(mostly Chinese) out of the American market, but they came 

close in July 2008 to exporting more steel than the country 

imported for the first time in decades. Another factor that 

helped U.S. steel exports to rise was the relative self-sufficiency of American steel producers. Asian steel producers are 

much more dependent upon imported iron ore than American producers, who tend to own ore-producing properties. 

In January 2008, Rio Tinto (the world’s largest iron-ore 

mining firm) led other companies in an effort to lift the approximately $80/ton of iron ore that Asian firms were paying to a level closer to that of the world iron-ore spot price 

(around $180/ton in January 2008).3 By late February, Rio 

Tinto had succeeded in raising the price that Japanese and 

Korean steel makers paid by about 65 percent. By June, the 

Chinese firms finally had capitulated, agreeing to 80-percent 

price hikes.4 U.S. ferrous scrap exports during the first three 

quarters of 2008 increased almost 40 percent compared with 

the same period in 2007.5

During mid-August and early September 2008, the economic downturn signaled a turning point for steel and ferrous scrap exports. The Producer Price Index for iron and 

steel scrap fell 22 percent in September. This was followed 

by a decline of 39 percent in October and 36 percent in November. From August to November the ferrous scrap index 

tumbled 70 percent from its high. 

Ore exporters, flush from hard-won price hikes, were 

stunned when ore and scrap, after having been shipped 

halfway across the world, were turned away at the gates 

of Asian steel mills.6 The construction boom in the oil 

states—and its resulting demand for steel—retreated as oil 

prices dropped almost as fast as ferrous scrap prices. This 

price collapse was compounded by a corresponding collapse in production: domestic steel output was cut almost 

in half over this time frame.7

The suddenness of the drop in the price of steel exacerbated the effect of the price changes for scrap. In contrast to 

steel mills with blast furnaces that plan production months 

in advance, steel producers that used mostly EAFs were able 

to respond quickly in the face of collapsing steel demand. 

Demand for scrap dropped drastically, some EAFs fell silent, 

and steel mills worked through stockpiled scrap and prepurchased ore while producing steel that fewer people wanted 

to buy. 

By the end of the year, steel producers presided over mills 

that had drastically cut back production. Demand for scrap 

in the world economy was almost as low as demand for new 

steel, as firms and consumers averse to spending money delayed junking cars and other aging machines, waiting for 

signs of an uptick in the economy.

The unbearable lightness of demand: a survey of the ferrous scrap market in 2008

NOTES

1

 “Steel recycling rates at a glance,” on the Internet at www.recycle-steel.

org/pdfs/2007Graphs.pdf (visited July 17, 2009). 
PPI Highlights, 2008

40  Monthly Labor Review • July 20

as other parts of Asia, is the main importer of recycled 

materials from the United States because it has no indigenous source of fiber supply. In the first 3 months 

of 2008, wastepaper prices rose 3.8 percent because of 

increased demand for exports in the wake of a weak U.S. 

dollar. Prices began to turn down in April when the U.S. 

dollar started showing signs of recovery. The index fell 

dramatically in the final quarter of 2008, 54.4 percent, as 

the global economic slowdown led to weak demand and 

a surplus of unsold waste products. Low volume makes 

recycling wastepaper more expensive than using landfills, a phenomon which exacerbated an already existing 

weakness in demand. 

Raw cotton. Prices for raw cotton declined 12.3 percent in 2008 following an increase of 20.1 percent in 

2007. The index rose slightly through April and fell over 

the remainder of the year, other than when it made a 

moderate jump in September. Prices for cotton rose 

slowly early in the year as farmers switched to planting more profitable crops, especially soybeans. Soybean 

prices were up 76.8 percent in 2007, and they increased 

an additional 26.0 percent during the first half of 2008. 

As a result, the number of acres on which cotton was 

harvested was 26.3 percent lower in 2008 than in 2007.60

Fear of a shortage of cotton intensified when hurricanes 

Gustav and Ike damaged crops in early September, causing a 4.4-percent spike in the index. Initial reporting 

estimated that more than 47 percent of the cotton crop 

had been destroyed.61 By October, prices were declining 

again as it became clear the predicted crop damage had 

been overstated. By the end of 2008, undersupply worries were overshadowed by the reality of a surplus due to 

the slowing global economy. Falling demand from developing countries, major consumers of cotton that were 

particularly vulnerable to the global economic downturn, 

forced cotton prices down.62 The initial undersupply of 

cotton somewhat worked in favor of cotton prices when 

the economy crashed. Although the cotton index declined 8.9 percent in 2008, prices did not fall as much 

as those of corn and soybeans, which dropped 24.0 and 

29.8 percent, respectively.

Construction sand, gravel, and crushed stone. Subsequent 

to an 8.4-percent increase in 2007, the index for construction sand, gravel, and crushed stone rose 6.7 percent 

in 2008, moving steadily higher in every month of the 

year. While growth slowed in this index, continued investment in nonresidential construction and government 

infrastructure projects supported the increase in prices. 

According to the U.S. Department of Commerce, spending in the nonresidential-construction sector increased 

15.3 percent in 2008.63 Demand was also bolstered by 

publicly funded construction projects and government 

expenses, such as road construction, beach upkeep, and 

snow and ice control. According to the U.S. Geological Survey, 23 percent of construction sand, gravel, and 

crushed stone in the U.S. was used for road construction 

in 2008.64 

Services

Total trade industries. The Producer Price Index for the 

net output of total trade industries rose 7.3 percent in 

2008 after having increased by 3.9 percent a year earlier. 

PPIs for trade industries measure changes in margins—

that is, the difference between the selling price and acquisition cost of an item—received by wholesalers and 

retailers. The majority of trade industry indexes benefited 

from falling prices in late 2008, as acquisition costs fell 

faster than the selling prices of products. In 2008, the 

margin indexes for merchant wholesalers of durable and 

nondurable goods, grocery stores, and discount department stores increased more than they had a year earlier. 

By contrast, margins received by new car dealers turned 

down in 2008. (See table 8.)

The margin index for merchant wholesalers of nondurable goods climbed 17.3 percent in 2008 compared 

Notes— Continued —The unbearable lightness of demand: a survey of the ferrous scrap market in 2008 

2

 Dan Sandoval, “The Russian bear roars: discussions of global markets typically revolve around China; however, Russia is growing in prominence,” on the Internet at www.entrepreneur.com/tradejournals/article/169458968.html (visited July 6, 2009).

3

 Robert Matthews, “Rio Tinto to Lift Ore Prices,” The Wall Street Journal, Jan. 17, 2008, A13.

4

 Alex Wilson, “BHP, China Reach Iron-ore Deal,” The Wall Street Journal, 

July 4, 2008; see http://online.wsj.com/article/SB121515896854028845.

html (visited July 20, 2009).

5 Institute of Scrap Recycling Industries Friday Report, Jan. 16, 2009. Visit 

www.isri.org to obtain contact information and request a copy of the report.

6

 Robert Matthews, “Steelmakers Squeeze Suppliers,” The Wall Street 

Journal, Nov. 18, 2008, B2. 

7 Institute of Scrap Recycling Industries Friday Report, Nov. 21, 2008. Visit 

www.isri.org to obtain contact information and request a copy of the report.
Monthly Labor Review • July 2009  

with a 1.6-percent advance in the prior year. This index 

rose early in the year as margins were affected by low 

inventories for groceries and strong sales of chemical 

products. In the second half of 2008, wholesale margins 

continued to expand, reflecting a rapid collapse in the 

prices of commodities used in food products. U.S. Census Bureau data tracking nondurable goods in December 

2008 showed wholesale inventories 4.1 percent below 

2007 levels and a 6.9-percent increase in shipments.65

Margins received by merchant wholesalers of durable goods advanced 7.1 percent in 2008 subsequent to a 

4.0-percent gain in the prior year. Margins for durable 

goods rose because bloated inventories at the factory 

level resulted in wholesalers’ acquisition costs decreasing faster than selling prices. The November 2008 University of Michigan consumer confidence sentiment index reading of 55.3 was near its record low set in April 

and May of 1980, as declining employment, falling incomes, and evaporating household wealth left consumers in their most pessimistic state in 50 years—stifling 

demand for big-ticket items.66 December data from the 

U.S. Census Bureau showed wholesale inventories 7.0 

percent above 2007 levels and a 2.7-percent annual decline in shipments in 2008.67 

Margins received by supermarkets and grocery stores 

moved up 8.9 percent in 2008 following a 4.5-percent 

rise in 2007. Expanding margins were broad based in 

this industry. Margins turned up or rose more in 2008 

for meats, produce, frozen foods, nonedible groceries, 

and general merchandise. Most of the margin growth 

occurred in the second half of the year, as fuel prices—a 

major factor in food prices—plummeted. Nevertheless, 

margins began eroding around the holiday season because grocers were forced to lower prices in response to 

weak demand.

The margin index for discount department stores 

moved up 14.6 percent in 2008 compared with a 4.7-

percent gain in the previous year. Consumers, faced with 

historical declines in wealth due to the collapse of the 

stock and housing markets, avoided upscale, high-end 

stores and rediscovered discount department stores. They 

sought less expensive, store-branded products, resulting 

in higher margins for discount stores. Through this increase in foot traffic and attention to acquisition costs, 

discount stores found they could prosper in the weak 

economic environment.

Table 8. Annual percentage changes in Producer Price Indexes for selected services industries, 2004–08

Index 2004 2005 2006 2007 2008

Total trade industries........................................................................................... (

1

) (

1

)   (

1

)   3.9 7.3

Wholesale trade industries.............................................................................

1

)   (

1

)   (

1

)   3.0 11.2

Durable goods wholesalers.....................................................................

1

)   1.7 5.8 4.0 7.1

Nondurable goods wholesalers..............................................................

1

)   4.6 7.6 1.6 17.3

Discount department stores........................................................................... 8.5   .1   –3.6 4.7 1

Supermarkets and grocery stores................................................................. 7.4 6.3 –.4 4.5 

New car dealers................................................................................................... 2.4 3.9 4.4 4.2 –

   

Transportation and warehousing industries................................................ (

1

) (

1

)   (

1

)   6.6 3.1

Couriers................................................................................................................. 9.1 8.2 3.0 12.3 

Scheduled passenger air transportation .................................................... –1.5 7.7 –1.1 9.0 

Postal service....................................................................................................... 0.0 0.0 6.3 6.6 

General freight trucking................................................................................... 6.3 5.3 2.3 4.2 

Long-distance general freight trucking, by the truckload................. 4.8 5.9 1.2 3

Long-distance general freight trucking, less than truckload............ 8.0 5.3 3.7 5.

Local general freight trucking..................................................................... 8.9 3.1 3.8 6

Line-haul railroads............................................................................................. 7.4 13.1 1.9 9.2 

Rail transport of freight, by the carload................................................... 9.3 13.8 1.1 9

Rail transport of freight, intermodal ......................................................... –.8 10.4 5.5 11.

Passenger rail transportation...................................................................... .5 9.4 4.8 3

   

Total traditional services industries................................................................. (

1

)   (

1

)   (

1

)   1.8 .3

General medical and surgical hospitals...................................................... 4.6 4.2 3.9 3.8 

Portfolio management..................................................................................... 9.9 10.1 5.8 9.8 –1

Securities brokerages........................................................................................ 1.6 1.2 5.2 1.6 –1

Commercial banking......................................................................................... 1.3 11.5 1.3 –5.5 –

1

  Datum is unavailable.    
PPI Highlights, 2008

42  Monthly Labor Review • July 20

By contrast, the margin index for new car dealers 

moved down 3.7 percent in 2008 compared with a 4.2-

percent advance a year earlier. Most of the 2008 decline 

in margins was due to a 16.8-percent decrease in margins for new vehicle sales, as well as a drop in financing 

and insurance prices.68 From its inception in December 

1999 though December 2008, the index for the margin 

on new vehicle sales fell 22.6 percent. Dealer margins 

on used vehicle sales also fell in 2008, by 11.9 percent. 

Margins received by car dealers were negatively affected 

by higher fuel prices early in the year, which shifted demand away from SUVs and sport models (which typically have higher margins than most other vehicles), and 

by the deterioration in consumer confidence and wealth 

that occurred later in the year.

Total transportation and warehousing industries. The 

Producer Price Index for the net output of total transportation and warehousing industries rose 3.1 percent 

in 2008 after having advanced 6.6 percent in the preceding year. The majority of the indexes included in this 

category peaked in the third quarter of 2008 and then 

fell sharply, due to the economic slowdown and the effect of diminishing fuel surcharges. In 2008, the indexes 

for couriers, scheduled passenger air transportation, the 

U.S. Postal Service, and line-haul railroads increased at 

slower rates compared with 2007. Prices received by the 

general freight trucking industry group declined following gains in the prior year. 

The index for couriers edged up 1.2 percent in 2008 

subsequent to a 12.3-percent increase in 2007. Prices in 

this industry peaked in September at a level 9.3 percent 

higher than the start of the year; during the final quarter 

of 2008, the index retreated 8.5 percent. Some companies 

in this industry downsized their operations by limiting 

delivery areas, in response to the weak economic climate 

and a poor business outlook. Demand is price sensitive 

in this industry, and soaring fuel surcharges early in the 

year caused some buyers to pursue alternatives to help 

lower costs, including buying from local businesses and 

lengthening delivery times.

Prices received by the scheduled passenger air transportation industry moved up 4.7 percent in 2008 compared 

with a 9.0-percent advance a year earlier. Fuel surcharges 

boosted this index in the first half of the year, although 

these gains were moderated by weak demand in subsequent 

months. According to Bloomberg News, “U.S. airline traffic 

fell in 2008 for only the fifth time since the government 

began tracking the data 35 years ago as the global economy 

weakened and carriers slashed schedules.”69 

The U.S. Postal Service index increased 2.8 percent 

in 2008 subsequent to advances of 6.6 percent in 2007 

and 6.3 percent in 2006. As a result of the Postal Accountability and Enhancement Act of 2006, the U.S. 

Postal Service can increase rates with 45 days notice as 

long as the increase falls within the CPI rate of inflation for the prior 12 months. Through January 2008, the 

CPI increased 2.9 percent. The resulting increase in U.S. 

postal rates on May 12, 2008, was broad based, covering 

all mailing classes, domestic and international, as well as 

special services.70 

The line-haul railroads index rose 3.8 percent following a 9.2-percent jump in 2007. Within this industry, 

the indexes for freight rail transportation by the carload 

and passenger rail transportation posted increases, while 

prices for intermodal freight transportation declined 

in 2008. As noted in a January 2009 press release from 

the Association of American Railroads, although 2008 

freight rail traffic was the fourth highest in history, total 

ton-miles shipped by domestic railroads decreased 1.3 

percent from 2007, and 15 of the 19 commodities followed by the association experienced a decrease in volume shipped in 2008.71 

Prices received by the general freight trucking industry edged down 0.3 percent in 2008. Calendar-year 

declines of 0.6 percent and 2.3 percent, respectively, for 

truckload and less-than-truckload long-distance general 

freight trucking, were at or near record levels, and the 

1.9-percent advance in the index for local general freight 

trucking was the index’s smallest increase since 2002. 

Operational costs, affected greatly by volatile diesel fuel 

prices and lower freight volumes brought about by the 

weakened economy, made for an especially challenging environment in 2008 for the trucking industry. The 

American Trucking Association’s for-hire truck tonnage 

index fell 14.1 percent in 2008, retreating to its lowest 

level since December 2000.72 

Total traditional service industries. The Producer Price 

Index for the net output of total traditional service 

industries edged up 0.3 percent in 2008 following a 

1.8-percent rise in the prior year. Prices received by 

the general medical and surgical hospitals industry increased at slower rates compared with 2007, whereas 

the indexes for portfolio management and securities 

brokerages turned down in 2008. Prices received by the 

commercial banking industry fell more than they had 

a year earlier.

The general medical and surgical hospitals index rose 

2.1 percent in 2008 subsequent to a 3.8-percent gain a 
Monthly Labor Review • July 2009  

year earlier. Each year, two factors account for the majority of the annual movement of this index. In January, 

adjustments are made to reflect changes in insurance 

companies’ reimbursements and modifications in hospital billings. These adjustments resulted in a 0.2-percent 

advance in the hospital index in January 2008, compared 

with 0.8-percent gains in the prior two Januarys. Medicare and Medicaid reimbursement rates are usually revised in October, at the start of the Federal Government’s 

fiscal year. For fiscal year 2009, the Centers for Medicare 

and Medicaid Services issued a final rule that increased 

Inpatient Prospective Payment System rates by 3.6 percent (1.6 percent for hospitals that do not submit quality 

data). The effect of this revision was a 1.2-percent rise in 

the October PPI for hospitals. For fiscal year 2009, hospitals are required to report 43 quality measures on their 

claims for Medicare inpatient services to qualify for a full 

update to their fiscal year 2009 payment rates. Overall, 

the final rule is estimated to increase Medicare payments 

to acute care hospitals by nearly $4.75 billion.73

In 2008, the index for portfolio management declined 

16.8 percent compared with a 9.8-percent gain in 2007. 

The movement of this index reflects the fees paid to fund 

managers on the basis of the value of assets under management, assets which for the most part were reduced in 

2008’s historic bear market. Major market indexes like 

the Standard and Poor’s 500 and the Wilshire 5000 registered 40 percent declines for the year, as asset prices were 

hammered by a deflating credit bubble and the associated 

economic contraction. In December 2008, the National 

Bureau of Economic Research reported that the U.S. 

economy had been in recession since December 2007.74

The index for securities brokerages dropped 10.5 percent in 2008 compared with a 1.6-percent gain a year earlier. Brokerage commissions are based on the asset value 

in stock or mutual fund transactions; consequently, the 

bear market in 2008 had a negative impact on pricing 

in this industry. Additionally, prices received by securities brokerages for margin lending were adversely affected 

when the Federal Reserve lowered the Federal funds rate 

to 0.25 percent in response to the weak economic environment.

Prices received by the commercial banking industry 

dropped 9.3 percent in 2008 after having fallen 5.5 percent in 2007. The banking sector had a very difficult year 

in 2008: annual earnings dropped to their lowest levels 

since 1989, with interest income falling 16.8 percent. The 

first full-year trading loss was a factor in the 11-percent 

decline in noninterest income.75 Credit losses surged because of deteriorating asset quality in real estate portfolios. 

Problems in the credit market also led to lowered demand 

and pricing power for securitized products, items which 

are typically a major source of revenue for the commercial 

banking industry. According to the Federal Deposit Insurance Corporation’s (FDIC’s) quarterly banking profile, 

the percentage of unprofitable FDIC-insured commercial 

banks rose from 10.7 percent in 2007 to 22.1 percent in 

2008 despite strong growth in domestic deposits.76

ACKNOWLEDGMENTS: The authors thank Michael J. Conforti, Jr., for writing “2008 price highlights for the finance industry”; Joseph A. Nunes for writing “Wild ride for milled rice in 2008”; and Sterling E. Kelley for writing “The 

unbearable lightness of demand: a survey of the ferrous scrap market in 2008.” 

Michael J. Conforti, Jr.; Joseph A. Nunes; and Sterling E. Kelley are economists 

in the Office of Prices and Living Conditions, Bureau of Labor Statistics.

1

 Finished goods are commodities that are ready for sale to final-demand users, either as durable or nondurable goods for consumers or as capital equipment 

for businesses.

2

 Intermediate goods consist of material and component inputs for manufacturing and construction, as well as supplies for all types of businesses. 

3

 Intermediate energy goods are energy products for distribution to businesses, 

and finished energy goods are energy products for distribution to households. 

4

 For a detailed discussion of price transmission across stages of processing, 

see Jonathan Weinhagen, “An empirical analysis of price transmission by stage 

of processing,” Monthly Labor Review, November 2002, pp. 3–11, as well as 

Jonathan Weinhagen, “Consumer gasoline prices: an empirical investigation,” 

Monthly Labor Review, July 2003, pp. 3–10.

5

 The stage-of-processing indexes for finished goods, intermediate goods, 

and crude goods other than foods and energy are commonly referred to as the 

finished core, intermediate core, and crude core indexes. Also, the index for crude 

goods other than foods and energy sometimes is referred to as the index for 

crude nonfood materials less energy or the index for basic industrial materials.

6

 See the indexes for materials for durable manufacturing and materials for 

nondurable manufacturing. These two indexes composed nearly 24 percent of 

the intermediate goods index at the start of 2008.

7 See the indexes for materials and components for construction, components 

for manufacturing, and supplies to nonmanufacturing industries (less feeds). 

These three indexes composed nearly 43 percent of the intermediate goods index at the start of 2008.

8

 Jonathan Weinhagen, “An empirical analysis of price transmission by stage 

of processing,” and “Consumer gasoline prices: an empirical investigation.” 

9 Gross Domestic Product: Fourth Quarter 2008 (Final), BEA 09–11 (Bureau of 

Economic Analysis, Mar. 26, 2009).

10 Ibid; and Strong dollar’s downside, The Hawk Eye, online at www.thehawkeye.com/Story/mm-090908 (visited June 5, 2009).

11 Prospects for the Global Economy, Global Economic Prospects 2009: Commodity 

Markets at the Crossroads, The International Bank for Reconstruction and Development/The World Bank, December 9, 2008, pp. 24–35. For additional GDP

data, go to www.esri.cao.go.jp/en/sna/menu.html (visited June 30, 2009) for 

NOTES
PPI Highlights, 2008

44  Monthly Labor Review • July 20

data from the Economic and Social Research Institute (ESRI) of Japan, http://

epp.eurostat.ec.europa.eu (visited June 30, 2009) for data from EUROSTAT, and 

www.stats.gov.cn/enGliSH/ (visited June 30, 2009) for data from the National 

Bureau of Statistics of China.

12 Federal Reserve Statistical Release, Industrial Production and Capacity Utilization, G.17 (419), Table 11: “Historical Statistics for Industrial Production, 

Capacity, and Utilization: Total Industry” (Board of Governors of the Federal 

Reserve System, Mar. 16, 2009). 

13 The crude and refined petroleum products production, stocks, and consumption data included in this section come from databases of the Energy 

Information Administration (EIA) of the U.S. Department of Energy. These 

data are most easily accessed either by visiting the EIA online publication titled This Week in Petroleum at http://tonto.eia.doe.gov/oog/info/twip/twip.

asp (visited June 30, 2009), or by visiting the EIA webpage for U.S. petroleum 

data at www.eia.doe.gov/oil_gas/petroleum/info_glance/petroleum.html 

(visited June 30, 2009). 

14 Short-Term Energy Outlook, Table 3C (Energy Information Administration, 

June 2009), online report available at www.eia.doe.gov/emeu/steo/pub/contents.html (visited June 30, 2009).

15 See “International Petroleum (Oil) Prices and Crude Oil Import Costs,” 

Energy Information Administration, at www.eia.doe.gov/emeu/international/oilprice.html (visited June 30, 2009).

16 The EIA defines the term product supplied as follows: “[Product supplied] 

approximately represents consumption of petroleum products because it measures the disappearance of these products from primary sources, i.e., refineries, 

natural gas processing plants, blending plants, pipelines, and bulk terminals. 

In general, product supplied of each product in any given period is computed 

as follows: field production, plus refinery production, plus imports, plus unaccounted for crude oil, (plus net receipts when calculated on a PAD District 

basis), minus stock change, minus crude oil losses, minus refinery inputs, minus 

exports.” The EIA glossary is located at www.eia.doe.gov/glossary/index.html

(visited June 30, 2009). 

17 See http://tonto.eia.doe.gov/dnav/pet/pet_cons_psup_dc_nus_mbbl_

m.htm (visited June 30, 2009).

18 Natural Gas Prices, Energy Information Administration, online report 

available at http://tonto.eia.doe.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm 

(visited June 30, 2009).

19 Weekly Natural Gas Storage and Natural Gas Monthly, Energy Information 

Administration, online reports available at www.eia.doe.gov/oil_gas/natural_gas/data_publications/natural_gas_monthly/ngm.html (visited June 30, 

2009). For the definition of working (top storage) gas in underground storage, 

go to www.eia.doe.gov/glossary/glossary_w.htm (visited June 30, 2009).

20 Ibid.

21 Propane is a component of the liquefied petroleum gas sector, for which 

EIA data are available. Within the propane market, there were no major shocks 

to propane production, imports, stocks, or demand over the 2007 to 2008 period. Data for propane are available at http://tonto.eia.doe.gov/oog/info/twip/

twip_propane.html (visited June 30, 2009), an online publication produced by 

the EIA.

22 “Table 1.1. Net Generation by Energy Source,” Energy Information Administration, on the Internet at www.eia.doe.gov/cneaf/electricity/epm/table1_1.html (visited June 30, 2009). As of December 2007, the major sources 

of power and their percentages of net electricity generation were: coal, 48.5 

percent; natural gas, 21.6 percent; nuclear power, 19.4 percent; and hydroelectric power, 6.0 percent.

23 U.S. coal-sector data, EIA, on the web at www.eia.doe.gov/emeu/mer/

coal.html (visited June 30, 2009). 

24 See www.eia.doe.gov/cneaf/electricity/epm/table1_1.html. 

25 Renewable resources, as defined by the EIA, include: wood, black liquor (paper pulp waste), other wood waste, biogenic municipal solid waste, landfill gas, 

sludge waste, agriculture byproducts, other biomass, geothermal energy, solar 

thermal energy, photovoltaic energy, and wind.

26 This shift is likely traceable to changing consumer preferences, due in part 

to higher prices for fossil fuels used for electric power generation. Despite 

higher prices for coal and natural gas, data from the Electric Power Research 

Institute describe the comparative cost of electric power generation per megawatt as follows: coal, $64; nuclear, $73; natural gas, $73 to $87; wind, $91; and 

solar, $175. See “Program on Technology Innovation: Integrated Generation 

Technology Options,” Report No. 1018329, Electric Power Research Institute, 

November 2008, pp. 1–12, tables 1–4. To retrieve the file, go to www.epri.com

(visited June 30, 2009), enter “epri 1018329” in the “search” field, and click on 

the “download” button.

27 “Milk Production,” National Agricultural Statistics Service, on the Internet at http://future.aae.wisc.edu/collection/MilkProduction/mprod_2008_

12.txt (visited June 30, 2009).

28 The series identifier for fluid milk is WPU016. 

29 “Milk Production,” on the Internet at http://future.aae.wisc.edu/collection/MilkProduction/mprod_2008_12.txt.

30 Vegetables: Acreage – Spring Quarter (Apr., May, Jun.), (USDA National Agricultural Statistics Service, Apr. 4, 2008), on the Internet at www.nass.usda.

gov/Statistics_by_State/Florida/Publications/Vegetables/spring/vegspr08.

doc (visited June 30, 2009).

31 See www.adamsbrothers.com/Adams/PDF/6-20-2008-marketreport.pdf 

(visited June 30, 2009).

32 FDA Warns Consumers Nationwide Not to Eat Certain Types of Raw Red 

Tomatoes, (U.S. Food and Drug Administration), June 7, 2008, on the Internet at www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/2008/

ucm116908.htm (visited June 30, 2009).

33 The series identifier for fresh fruits and melons is WPU0111. 

34 Patricia Miller, “The Big Chill” (USDA Rural Development), on the Internet at www.rurdev.usda.gov/rbs/pub/mar07/big.htm (visited June 30, 2009).

35 “The Week in Florida Agriculture, December 8–14, 2008,” on the Internet at www.florida-agriculture.com/pubs/pubform/pdf/theweek_081208.

pdf (visited June 30, 2009).

36 Prospective Plantings, U.S. Department of Agriculture, Mar. 31, 2008, on 

the Internet at http://usda.mannlib.cornell.edu/usda/nass/ProsPlan//

2000s/2008/ProsPlan-03-31-2008.pdf (visited June 30, 2009) 

37 Gary Vocke, Edward Allen and Olga Leifert, Wheat Outlook (USDA, Dec. 

15, 2008), on the Internet at http://usda.mannlib.cornell.edu/usda/ers/WHS/

/2000s/2008/WHS-12-15-2008.pdf (visited June 30, 2009).

38 “Table 8—Wheat: U.S. exports and imports for last 6 months (1,000 bushels),” data from the U.S. Census Bureau and ERS calculations using Census trade 

data, on the Internet at www.ers.usda.gov/briefing/wheat/Data/WheatOutlookTable8.xls (visited June 30, 2009).

39 Ibid.

40 World Agricultural Supply and Demand Estimates (USDA, June 10, 2008), 

on the Internet at http://usda.mannlib.cornell.edu/usda/waob/wasde//

2000s/2008/wasde-06-10-2008.pdf (visited June 30, 2009).

41 “Beef and veal: Monthly U.S. trade (carcass weight, 1,000 pounds),” USDA’s 

livestock and meat trade data, on the Internet at www.ers.usda.gov/data/meattrade/Data/BeefVeal_Monthly-Full.xls (visited June 30, 2009).

42 The series identifier for slaughter cattle is WPU0131.

43 “Economic Meltdown Hinders U.S. Beef, Pork Exports, but Long-Term 

Position Strong,” U.S. Meat Export Federation, Nov. 5, 2008, on the Internet at 

www.usmef.org/TradeLibrary/News08_1105a.asp (visited June 30, 2009).

44 “Beef and veal,” on the Internet at www.ers.usda.gov/data/meattrade/

Data/BeefVeal_Monthly-Full.xls.

45 “Table 4—Corn: Marketing year supply and disappearance,” Feed Grains 

Database: Yearbook Tables, USDA’s Economic Research Service, on the Internet 

at www.ers.usda.gov/data/feedgrains/StandardReports/YBtable4.htm (visited June 30, 2009).
Monthly Labor Review • July 2009  

46 “Table 4—World and U.S. wheat production, exports and ending stocks,” 

Wheat Data: Yearbook Tables, USDA’s Economic Research Service, on the Internet at www.ers.usda.gov/Data/Wheat/YBtable04.asp (visited June 30, 2009).

47 Michelle Krebs and Bill Visnic, “2008 U.S. Auto Sales are Worst Since 

1992,” Auto Observer, Jan. 5, 2009, on the Internet at www.autoobserver.

com/2009/01/2008-us-auto-sales-are-worst-since-1992.html (visited June 3, 

2009); and Ed Wallace, “2009: Slow Auto Sales, Higher Prices,” Business Week, 

Dec. 18, 2008, on the Internet at www.businessweek.com/lifestyle/content/

dec2008/bw20081218_689313.htm (visited June 3, 2009).

48 The events of September 11th, 2001, caused a dramatic decline in demand 

for air travel. See Dan Reed, “U.S. airlines may face huge plane bill,” USA Today, July 10, 2007, on the Internet at www.usatoday.com/travel/flights/2007-

07-10-airplane-replacements_N.htm?loc=interstitialskip (visited Apr. 29, 

2009).

49 D’Arcy Doran, “Airbus: World will order 24,300 planes by 2026,” USA Today, Feb. 8, 2008, on the Internet at www.usatoday.com/travel/flights/2008-

02-08-airbus-forecast_N.htm (visited Apr. 29, 2009).

50 Tobacco Master Settlement Agreement Summary (Office of the Attorney General, State of California), on the Internet at www.ag.ca.gov/tobacco/resources/

msasumm.htm (visited May 4, 2009).

51 Scott Sabatini, “AGs block online tobacco sales,” LegalNewsline.com, Sept. 

19, 2008, on the Internet at www.legalnewsline.com/news/215883-ags-blockonline-tobacco-sales (visited Apr. 29, 2009).

52 “Annual Value of Public Construction Put in Place 2002-2008” (U.S. Census Bureau), on the Internet at www.census.gov/const/C30/public.pdf (visited Apr. 29, 2009).

53 “IISI Short Range Outlook,” World Steel Association, Apr. 14, 2008, on 

the Internet at www.worldsteel.org/?action=newsdetail&id=237 (visited Apr. 

29, 2009).

54 “Steel at the Beijing Olympics,” World Steel Association, on the Internet at

www.worldsteel.org/index.php?action=storypages&id=299 (visited Apr. 29, 

2009).

55 The series identifier for primary nonferrous metals is WPU1022.

56 Mineral Commodity Summaries 2009 (U.S. Geological Survey, U.S. Department of the Interior, 2009), p. 51; on the Internet at http://minerals.usgs.gov/

minerals/pubs/mcs/2009/mcs2009.pdf (visited Apr. 29, 2009).

57 Ibid, p. 18.

58 Chris Kelly and Michael Taylor, “Update 9-Copper up as weak dlr, China 

cuts ease demand woes,” Reuters, Nov. 13, 2008, on the Internet at www.reuters.

com/article/marketsNews/idUSLD44302420081113 (visited Apr. 29, 2009).

59 Mineral Commodity Summaries 2009, p. 85, on the Internet at http://minerals.usgs.gov/minerals/pubs/mcs/2009/mcs2009.pdf.

60 Crop Production 2008 Summary (U.S. Department of Agriculture, January 2009), on the Internet at http://usda.mannlib.cornell.edu/usda/current/

CropProdSu/CropProdSu-01-12-2009.pdf (visited Apr. 29, 2009).

61 “Louisiana: Hurricane Damages Crops and Fisheries,” The New York Times, 

Sept. 9, 2008), on the Internet at www.nytimes.com/2008/09/10/us/10brfsHURRICANEDAM_BRF.html?_r=1&scp=5&sq=cotton%20crop%202008&

st=cse (visited Apr. 29, 2009).

62 Important commodities in agricultural trade: cotton (Food and Agriculture Organization of the United Nations, World Trade Organization), on the Internet at 

www.fao.org/docrep/005/y4852e/y4852e12.htm (visited Apr. 29, 2009).

63 December 2008 Construction at $1,053.7 Billion Annual Rate (U.S. Census Bureau, Feb. 2, 2009), on the Internet at www.census.gov/const/C30/

pr200812.pdf (visited Apr. 29, 2009).

64 Mineral Commodity Summaries 2009, p. 138, on the Internet at http://minerals.usgs.gov/minerals/pubs/mcs/2009/mcs2009.pdf.

65 Full Report on Manufacturers’ Shipments, Inventories and Orders: December 

2008 (U.S. Census Bureau, Feb. 5, 2009) on the Internet at www.census.gov/

indicator/www/m3/PastPressReleases/Prel/2008/dec08prel.pdf (visited July 

6, 2009).

66 Lower Prices Provide Consumers Some Relief, Reuters/University of Michigan Survey of Consumers, November 2008 press release, on the Internet at 

https://customers.reuters.com/community/university/default.aspx? (visited 

July 6, 2009). 

67 Full Report on Manufacturers’ Shipments, Inventories and Orders, on the Internet at www.census.gov/indicator/www/m3/PastPressReleases/Prel/2008/

dec08prel.pdf.

68 Financing and insurance charges received by new car dealers fall under the 

PPI titled “other receipts,” coded as NAICS 441110. The series identifier for this 

index is PCU441110441110SM. 

69 Mary Jane Credeur, “U.S. Air Travel Fell in 2008 on Economy, Ending 

5-Year Advance,” Bloomberg.com, Jan. 7, 2009 on the Internet at www.bloomberg.com/apps/news?pid=newsarchive&sid=a_tPiC5LwMcQ (visited July 

6, 2009).

70 Postal Regulatory Commission Verifies Rate Cap Compliance (Postal Regulatory Commission), Mar. 17, 2008, on the Internet at www.prc.gov/prc-docs/

newsroom/PressReleases/PressRelease031708.pdf (visited July 6, 2009). 

71 Weekly Traffic of Major U.S. Railroads For the Week Ending January 3, 2009, 

Association of American Railroads, on the Internet at www.aar.org/NewsAndEvents/PressReleases/2008/12_WTR/~/media/Files/WeeklyTraffic/2009_WTR/WTR_010309_week5308.ashx (visited July 6, 2009); and 2008 

U.S. Rail Freight Traffic Fourth-Highest in History, But Down Sharply in December and the Fourth Quarter, Association of American Railroads, Jan. 7, 2009, 

on the Internet at www.aar.org/NewsAndEvents/PressReleases/2008/12_

WTR/010809_highestInHistory.aspx (visited July 6, 2009). 

72 “ATA Truck Tonnage Index Plummeted 11.1 Percent in December,” 

American Trucking Associations, Jan. 26, 2009, on the Internet at www.truckline.com/pages/article.aspx?id=471%2F{8E1C7279-ED27-4C03-B189-

CEEEE26BBB12} (visited July 6, 2009). 

73 Medicare Policy Changes for the Fiscal Year (FY) 2009 Hospital Inpatient Prospective Payment System (U.S. Department of Health and Human Services, Center for Medicare and Medicaid Services), Aug. 4, 2008, on the Internet at www.

cms.hhs.gov/apps/media/press/factsheet.asp?Counter=3223&intNumPerP

age=20&checkDate=&checkKey=&srchType=1&numDays=3500&srchO

pt=0&srchData=&keywordType=All&chkNewsType=6&intPage=&show

All=&pYear=&year=&desc=false&cboOrder=date (visited July 6, 2009).

74 “Determination of the December 2007 Peak in Economic Activity,” National Bureau of Economic Research, Dec. 11, 2008, on the Internet at www.

nber.org/cycles/dec2008.html (visited July 6, 2009).

75 Quarterly Banking Profile, “Table III-A. Full Year 2008, FDIC-Insured 

Commercial Banks,” Federal Deposit Insurance Corporation, on the Internet at 

www2.fdic.gov/qbp/2008dec/cb3.html (visited July 6, 2009).

76 Quarterly Banking Profile, “Table I-A. Selected Indicators, FDIC-Insured 

Commercial Banks,” Federal Deposit Insurance Corporation, on the Internet at 

www2.fdic.gov/qbp/2008dec/cb1.html (visited July 6, 2009).