1

Currently, the Bureau of Labor Statistics (BLS) 

uses the stage-of-processing (SOP) system 

as the key structure for analyzing producer 

prices. This system aggregates commodity 

price indexes for processed and unprocessed 

goods and is organized into three stages: 

finished goods, intermediate goods, and 

crude materials for further processing. Over 

the past 20 years, the BLS has expanded Producer Price Index (PPI) coverage to include 

price indexes for many service and construction activities. To expand the scope of coverage for the PPI, BLS recently developed 

an experimental aggregation system that 

includes price changes for goods, services, 

and construction sold to all portions of final 

demand and intermediate demand, based 

on information from the Bureau of Economic 

Analysis’ Input/Output accounts.1

Final demand

The final-demand segment of the PPI experimental aggregation system tracks price 

change for commodities—goods, services, 

and construction—sold by producers to 

all portions of final demand (personal conCurrent Price Topics

Producer Price Index 

Introduces Experimental 

Aggregation System

Producer Price Indexes: Fourth Quarter 2010

U.S. Bureau of Labor Statistics February 2011 Volume 1, Number 14

sumption, capital investment, government, 

and export). The final-demand segment 

of the experimental aggregation system is 

composed of six main price indexes: finaldemand goods, final-demand construction, 

final-demand transportation services, finaldemand trade services, final-demand traditional services, and overall final demand. 

The experimental final-demand goods index 

measures price change for both unprocessed 

and processed goods sold to final demand. 

Fresh fruits sold to consumers or computers 

sold as exports are examples of transactions 

included in this index. The final-demand 

construction index tracks price change for 

new construction as well as maintenance 

and repair construction sold to final demand. Construction of office buildings is an 

example of a commodity in this index. The 

final-demand transportation services index 

tracks price change for transportation of passengers and cargo sold to final demand and 

includes prices for warehousing and storage 

of goods sold to final demand. The finaldemand trade services index measures price 

change for the retailing and wholesaling of 

merchandise sold to final demand, generally 

without transformation.2 The final-demand 

traditional services index tracks price change 

for services other than trade and transportation services sold to final demand. Publishing, banking, lodging, and health care are 

examples of traditional services in the index. 
2

The overall final-demand index tracks price 

change for all types of commodities sold to 

final demand and is constructed by combining the five final-demand indexes described 

above.

Intermediate demand

The intermediate-demand portion of the 

PPI experimental aggregation system tracks 

price change for goods, services, and construction products sold to businesses as inputs to production, excluding capital investment. In order to meet the needs of different 

data users, the experimental aggregation 

system includes two separate treatments of 

intermediate demand. The first treatment 

organizes intermediate-demand commodities by commodity type and is structurally 

similar to the final demand portion of the 

system. The second approach organizes 

intermediate-demand commodities into 

stages by production flow with the explicit 

goal of developing a forward flow model of 

production and price change.

Intermediate demand by commodity type. The 

intermediate-demand-by-commodity-type 

portion of the experimental aggregation 

system organizes indexes for commodities sold to businesses, where types include 

goods, services, and maintenance and repair 

construction. The system is composed of six 

main price indexes: unprocessed goods for 

intermediate demand, processed goods for 

intermediate demand, intermediate-demand 

construction, intermediate-demand transportation services, intermediate-demand trade 

services, and intermediate-demand traditional services. The unprocessed-goods–forintermediate-demand price index measures 

price change for goods that have undergone 

no fabrication and will be sold to businesses 

as inputs to production. Crude petroleum 

sold to refineries is an example of an unprocessed good sold to intermediate demand. 

The processed-goods-for-intermediate-demand index tracks price change for fabricated 

goods sold as business inputs. Examples 

include car parts sold to car manufacturers 

and gasoline sold to trucking companies. The 

intermediate-demand construction index 

measures price change for construction 

purchased by firms as inputs to production. 

Because new construction is categorized in 

the final demand portion of the economy, 

this index tracks price change for maintenance and repair construction purchased by 

firms. The intermediate-demand transportation services indexes measure price change 

for business travel as well as transportation 

and warehousing of cargo sold to intermediate demand. The index for intermediate trade 

services measures price change in the service 

of retailing or wholesaling goods purchased 

by businesses as inputs to production. Finally, 

the intermediate traditional services price index tracks price change in traditional services 

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

purchased by firms as inputs to production. 

Legal and accounting services purchased 

by businesses are examples of intermediate 

traditional services.

Intermediate demand by production flow. The 

production flow treatment of intermediate 

demand within the experimental aggregation system is a stage-based system of price 

indexes. The stage-based indexes can be 

used to study price transmission relationships between intermediate demand stages, 

and to final demand.3 The production flow 

treatment contains four main indexes: 

intermediate-demand stages 1 through 4. 

Indexes for the four stages were developed 

by assigning each industry in the economy 

to one of four stages of production, where 

industries assigned to the fourth stage primarily produce output consumed for final 

demand, industries in the third stage primarily produce output consumed by stage 4 

industries, industries assigned to the second 

stage primarily produce output consumed 

by stage 3 industries, and industries assigned 

to the first stage produce output primarily 

consumed by stage 2 industries.4

The four stage-based intermediate-demand 

indexes track price change for the net inputs 

consumed by industries assigned to each of 

the four stages. The stage 4 intermediatedemand index, for example, tracks price 

change for inputs consumed, not produced, 

by industries included in the fourth stage. 

Hence, this index measures price change in 

the inputs to production for industries that 

primarily produce final-demand goods.5

Feedback and further information

The aggregation system described here is in 

its experimental phase, and the PPI program 

is seeking feedback from its users. To provide 

feedback, contact Jonathan Weinhagen by 

email at weinhagen.jonathan@bls.gov or by 

phone at (202) 691-7709.

For further information about the new PPI 

experimental aggregation system, please 

visit http://www.bls.gov/ppi/experimentalaggregation.htm. The experimental aggregation 

Web page contains information on relative 

importance figures for categories, various 

methodological articles from the Monthly 

Labor Review and PPI Detailed Report, a table 

showing the industry stage assignments in 

intermediate demand by production flow, 

a list of areas of non-coverage, and instructions for obtaining time series data. This 

information is also available from the PPI 

Section of Index Analysis and Public Information by email at ppi-info@bls.gov or by phone 

at (202) 691-7705.

 C U R R E N T P R I C E T O P I C S
The PPI for finished goods increased 4.0 

percent in 2010 after rising 4.3 percent in 

2009. This slightly slower rate of advance 

is attributable to prices for finished energy 

goods, which moved up 11.9 percent in 2010 

following a 19.4-percent jump a year earlier. 

By contrast, the indexes for finished consumer 

foods and for finished goods less foods and 

energy both climbed at faster rates than they 

had in 2009. (See chart 1.) At the earlier stages 

of processing, manufacturers of intermediate 

goods raised prices 6.5 percent in 2010, compared with a 2.9-percent gain in the previous 

year, as an upturn in the index for intermediate goods less foods and energy—in combination with a sharp acceleration in prices 

for foods and feeds—outweighed a slowing

advance in the intermediate energy goods

index. (See chart 2.) Prices for crude goods

increased 15.5 percent in 2010, compared 

with a 13.3-percent rise in 2009. The index for 

crude foodstuffs and feedstuffs surged 18.5 

percent after moving up just 2.5 percent in 

2009, more than offsetting slowing advances 

in prices for crude energy materials.

6

 (See 

chart 3.)

Economic background

In the foods sector in 2010, multiple events 

contributed to a broad-based acceleration in 

food inflation. Starting in late 2009 and continuing into early 2010, relatively weak production led to a run-up in prices for slaughter 

4

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

Current Price Trends

Producer Price Index Price 

Highlights for 2010

4.3

1.2

19.4

0.9

4.0 3.5

11.9

1.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

22.0

Overall Food Energy Core

Percent change

Dec 09 Dec 10

SOURCE: U.S. Bureau of Labor Statistics

Chart 1. Twelve-month percent change in PPI for overall, food, energy, and 

core finished goods, not seasonally adjusted
 C U R R E N T P R I C E T R E N D S

5

13.3

2.5

15.2

28.9

15.5

18.5

6.2

28.0

0.0

4.0

8.0

12.0

16.0

20.0

24.0

28.0

32.0

Overall Food Energy Core

Percent change

Dec 09 Dec 10

SOURCE: U.S. Bureau of Labor Statistics

Chart 3. Twelve-month percent change in PPI for overall, food, energy, and 

core crude goods, not seasonally adjusted

2.9

0.1

17.7

-0.1

6.5 6.2

13.6

4.6

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Overall Food Energy Core

Percent change

Dec 09 Dec 10

SOURCE: U.S. Bureau of Labor Statistics

Chart 2. Twelve-month percent change in PPI for overall, food, energy, and 

core intermediate goods, not seasonally adjusted
cattle7

 and fluid milk.

8

 By early 2010, the prices 

for meats and dairy products increased as 

well. In addition, after falling in the first half of 

2010, grains prices reversed course. The grains 

index increased 46.6 percent in the third 

quarter and 24.2 percent in the fourth quarter, representing an 82.1-percent surge from 

its low point in June through the end of the 

year. Corn production decreased 4.7 percent 

in 2010 as ending stocks dropped 7.9 percent, 

and although wheat production remained 

steady throughout the year, ending stocks 

for wheat fell 16.2 percent. Both corn and 

wheat were affected by poor growing seasons outside the United States, which fueled 

higher export demand and drove the declines 

in 2010 ending stocks.9 10 Similarly, the prices 

for prepared animal feeds and for cereal and 

bakery products turned up in the third quarter 

and exhibited accelerating rates of advance in 

the fourth quarter.

In contrast to the broad-based acceleration in 

food and feed prices, PPIs for energy goods 

moved up less in 2010 than they had in 2009. 

This deceleration, however, was concentrated 

in the petroleum sector and occurred over the 

first 9 months of the year as both production 

and stocks of crude petroleum remained ample in 2010.11 However, prices for crude petroleum and refined petroleum products showed 

renewed strength over the final quarter of 

2010 as market expectations of a projected 

improvement in economic growth resulted in 

ramped up demand through contracting for 

future deliveries.12

Unlike the volatility seen in prices for foods 

and energy goods, PPIs for goods other than 

foods and energy exhibited more subtle shifts, 

though the general trend of faster rates of 

increase were still common. Prices for basic 

industrial materials climbed at nearly a 30-percent clip for the second straight year and 

contributed to a strong upturn in the index 

for intermediate goods less foods and energy in the form of higher input prices. These 

intermediate core price increases were driven 

by improved economic growth, particularly 

outside the United States.13 Price pressures, 

however, were not as evident at the finished 

goods stage of processing, as the finished core

PPI advanced at only a slightly quicker rate 

than it had in 2009.14

Finished goods

Driving the 2010 deceleration in the finished 

goods index, price increases for finished energy goods slowed to 11.9 percent from 19.4 

percent a year earlier. The gasoline index led 

this smaller advance, climbing 18.4 percent 

after surging 77.6 percent in 2009. (The 2010 

rise in gasoline prices can be traced, in its entirety, to the final quarter of that year. Through 

September, the gasoline index decreased 3.4 

percent, but prices jumped 22.5 percent in the 

final quarter.) Prices for liquefied petroleum 

gas and kerosene also increased by smaller 

amounts in 2010 than in 2009. Conversely, the 

index for residential natural gas edged down 

1.1 percent in 2010 following a 15.6-percent 

drop in 2009. Prices for residential electric

6

 C U R R E N T P R I C E T R E N D S
power, home heating oil, and diesel fuel

increased at faster rates than they had in the 

previous year. The index for finished lubricants 

turned up after falling a year earlier.

The index for finished consumer foods advanced 3.5 percent in 2010 following a 

1.2-percent rise in the preceding year. Leading 

this acceleration, meat prices climbed 14.9 

percent after declining 2.7 percent in 2009. 

The indexes for cereal and bakery products, 

dairy products, and shortening and cooking 

oils also turned up in 2010. Conversely, prices 

for fresh and dry vegetables fell 5.0 percent 

following a 16.9-percent jump in 2009. The 

indexes for processed young chickens and 

frozen specialties also turned down after rising 

in the previous year. Prices for fresh fruits and 

melons advanced by a smaller amount in 2010 

than they had a year earlier.

The index for finished goods less foods and 

energy advanced 1.3 percent in 2010, slightly 

outpacing a 0.9-percent rise a year earlier. 

Leading this faster rate of increase, civilian 

aircraft prices climbed 2.5 percent following 

a 2.1-percent decrease in 2009. The indexes 

for consumer plastic products, paper, tires, 

and cosmetics and other toilet preparations

also turned up in 2010. In contrast, the light 

motor trucks index edged down 0.3 percent 

after rising 0.9 percent in the preceding year. 

Passenger car prices fell more than they had in 

2009, while the pharmaceutical preparations

index increased slightly less than it had a year 

earlier.

Intermediate goods

The Producer Price Index for Intermediate 

Materials for Further Processing rose 6.5 percent in 2010 after advancing 2.9 percent in 

the preceding year. Leading this acceleration, 

prices for intermediate materials less foods 

and energy increased in 2010 after decreasing in 2009. The index for intermediate foods 

and feeds increased more than a year earlier. 

By contrast, price advances for intermediate 

energy materials slowed relative to their 2009 

gains.

The index for intermediate materials less 

foods and energy increased 4.6 percent in 

2010 after edging down 0.1 percent in 2009. 

Prices for steel mill products climbed 12.5 

percent following a 9.8-percent decline in 

the previous year. The indexes for fertilizer 

materials, paperboard, basic inorganic chemicals, paper, and paper boxes and containers

also turned up in 2010. In contrast, price 

increases for primary basic organic chemicals 

slowed to 17.5 percent from an 87.7-percent 

surge in 2009. The index for copper and brass 

mill shapes also advanced less than a year 

earlier.

Prices for intermediate foods and feeds rose 

6.2 percent in 2010 following a 0.1-percent 

gain a year earlier. The meats index turned 

up 14.9 percent subsequent to a 2.7-percent 

decrease in 2009. Similarly, prices for fats and 

oils, flour and flour base mixes and doughs, 

processed cheese and related products, and 

fluid milk products also advanced in 2010 

7

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

after declining in 2009. The prepared animal 

feeds index increased more than in the prior 

year. In contrast, prices for confectionery materials fell 7.8 percent in 2010 compared with 

a 5.0-percent advance a year earlier. The index 

for young chickens also turned down after 

increasing in 2009.

The rise in the index for intermediate energy 

materials slowed to 13.6 percent in 2010 

from 17.7 percent in 2009. Prices for liquefied 

petroleum gas advanced 16.5 percent following a 119.1-percent surge in 2009. Increases 

in the indexes for gasoline and residual fuels

also slowed compared with the prior year. By 

contrast, prices for natural gas to electric utilities turned up 4.9 percent after declining 11.9 

percent in 2009. Prices for commercial natural 

gas decreased less in 2010 than a year earlier. 

The indexes for electric power and diesel fuel

advanced more than in the preceding year. 

Prices for finished lubricants turned up after 

falling in 2009.

Crude goods

The Producer Price Index for Crude Materials 

for Further Processing rose 15.5 percent in 

2010 compared with a 13.3-percent increase 

in the previous year. The 2010 acceleration 

was the result of a faster rate of increase in 

the index for crude foodstuffs and feedstuffs. 

By contrast, price advances for crude energy 

materials and crude nonfood materials less 

energy slowed from their 2009 rates.

8

In 2010, prices for crude foodstuffs and feedstuffs moved up 18.5 percent, following a 

2.5-percent advance in 2009. About half of 

this acceleration can be traced to the index 

for slaughter cattle, which turned up 25.3 

percent after a 2.9-percent decline in 2009. 

Prices for slaughter chickens, alfalfa hay, and 

Irish potatoes for processing also advanced 

following decreases in the previous year. 

The index for grains rose more in 2010 than 

in 2009. By contrast, the index for fresh vegetables, except potatoes turned down 11.3 

percent after jumping up by 35.0 percent in 

2009. Prices for slaughter barrows and gilts

and for fluid milk advanced less in 2010 than 

they had a year earlier.

The index for crude energy materials increased 6.2 percent in 2010 following a 

15.2-percent climb in the prior year. Crude 

petroleum prices accounted for most of this 

deceleration, rising 23.8 percent subsequent 

to an 87.0-percent surge in 2009. The index 

for coal also increased less than a year earlier. 

Conversely, natural gas prices declined at a 

slower rate in 2010, 12.2 percent, compared 

with a 19.4-percent drop in 2009.

The advance in the index for crude nonfood 

materials less energy slowed to 28.0 percent 

from 28.9 percent a year earlier. In 2010, increasing prices for iron and steel scrap, nonferrous metal ores, nonferrous scrap, wastepaper, 

corn, and raw cotton outweighed decreases in 

the indexes for pulpwood, table grapes, and 

rough rice.
9

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

Trade industries

In 2010, the increase in the Producer Price 

Index for the Net Output of Total Trade Industries accelerated to 1.1 percent in 2010 from 

0.3 percent in 2009. (Trade indexes measure 

changes in margins received by wholesalers and retailers.) Most of this faster rate of 

advance can be traced to the margin index 

for grocery stores, which climbed 4.0 percent 

after declining 6.0 percent in the previous 

year. Margins received by radio, television, 

and other electronics stores and by merchant 

wholesalers of durable goods also turned 

up in 2010. In addition, the margin index for 

discount department stores advanced more 

than it had a year earlier. In contrast, margins 

received by gasoline stations dropped 18.9 

percent subsequent to a 6.7-percent rise in 

2009. The margin index for pharmacies and 

drug stores also turned down after advancing in the prior year. The index for department stores (except discount stores) declined 

more in 2010 than a year earlier, while margins received by new car dealers rose less 

than in 2009.

Transportation and warehousing industries

The Producer Price Index for the Net Output 

of Transportation and Warehousing Industries

climbed 3.8 percent in 2010 compared with 

a 0.5-percent decline in 2009. Leading this 

upturn, prices received by the long distance 

general freight trucking industry group rose 

5.1 percent after falling 2.0 percent in the previous year. The industry indexes for scheduled 

air transportation, line-haul railroads, deep 

sea freight transportation, specialized freight 

trucking, and freight transportation arrangement also turned up after declining in 2009. In 

addition, the index for pipeline transportation 

of crude oil advanced more than it had in the 

previous year. Conversely, the rise in the index 

for the postal service industry slowed to 0.5 

percent from 3.5 percent in 2009.

Traditional service industries

In 2010, the increase in the Producer Price Index for the Net Output of Total Traditional Service Industries accelerated to 2.1 percent from 

1.7 percent in 2009. The index for the investment banking and securities dealing industry 

jumped 17.1 percent after falling 9.5 percent 

in the previous year. The industry index for 

hotels and motels (except casino hotels) also 

turned up in 2010 after declining in 2009. 

Prices received by the depository credit intermediation industry group rose more in 2010 

than a year earlier, and the index for software 

publishers declined less than it had in 2009. By 

contrast, price increases received by hospitals

slowed to 2.2 percent from 3.8 percent in the 

previous year. The index for the insurance carriers industry group also advanced less in 2010, 

and prices received by securities brokerages

turned down after advancing in 2009.
10

Notes

1

 Despite the broad expansion of PPI coverage into the services and construction sectors, coverage of the United States economy is 

still incomplete. For a list of areas not covered by PPI and therefore not included in either the current SOP system or experimental 

aggregation system, see http://www.bls.gov/ppi/ppinoncoverage.htm.

2

 PPIs for retail and wholesale trade measure the difference between the price received by the trade establishment for selling a good 

and the price paid by the trade establishment to acquire the good.

3

 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, 

“Price transmission within the PPI for intermediate goods,” Monthly Labor Review, May 2005, pp 41–49.

4

 For a list of industries assigned to each stage of production, see http://www.bls.gov/ppi/industryflowstage.htm.

5

 In practice, due to the complex nature of the economy, the PPI program made industry assignments by attempting to maximize net 

forward flow within the system. Net forward flow is defined as follows:

(forward shipments of the industry stage + inputs received from prior stages of process) – (backward shipments of the industry stage 

+ inputs received from forward stages of process).

Bureau of Economic Analysis Input/Output data were used to calculate net forward flow and to make industry assignments. 

6

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

2010. All PPI data are recalculated 4 months after original publication to reflect late data received by survey respondents. In addition, seasonally adjusted PPIs are recalculated, on an annual basis, for 5 years, to reflect more recent seasonal patterns.

7

 “Livestock Slaughter,” Mt An 1-2 (1-10), Jan. 22, 2010, United States Department of Agriculture, available on the Internet at 

http://usda.mannlib.cornell.edu/usda/nass/LiveSlau//2010s/2010/LiveSlau-01-22-2010.pdf (visited Jan. 14, 2011).

8

 “Milk Production,” Da 1-1 (1-10), Jan. 19, 2010, United States Department of Agriculture, on the Internet at http://usda.mannlib.

cornell.edu/usda/nass/MilkProd//2010s/2010/MilkProd-01-19-2010.pdf (visited Jan. 14, 2011).

9

 “Feed Outlook,” FDS-11a, Jan. 14, 2011, United States Department of Agriculture, available on the Internet at http://usda.mannlib.cornell.edu/usda/ers/FDS//2010s/2011/FDS-01-14-2011.pdf (visited Jan. 14, 2011).

10 “Wheat Outlook,” WHS-at, Jan. 14, 2011, United States Department of Agriculture, available on the Internet at http://usda.

mannlib.cornell.edu/usda/ers/WHS//2010s/2011/WHS-01-14-2011.pdf (visited Jan. 14, 2011).

11 Energy Information Administration, Petroleum Statistics, available on the Internet at http://www.eia.gov/oil_gas/petroleum/

info_glance/petroleum.html (visited Jan. 14, 2011).

12 “This Week in Petroleum,” Energy Information Administration, available on the Internet at http://www.eia.gov/oog/info/twip/

twiparch/110112/twipprint.html (visited Jan. 14, 2011).

13 “Global Economic Prospects, Navigating Strong Currents,” volume 2, January 2011, (p. 4), The World Bank, available on the 

Internet at http://siteresources.worldbank.org/INTGEP/Resources/335315-1294842452675/GEPJanuary2011FullReport.pdf

(visited Jan. 14, 2011).

14 More highly processed intermediate and finished goods commonly exhibit price movements that are somewhat different from 

price movements for less processed goods, because 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. Contracts and escalation agreements also can delay or 

mitigate the pass-through effect of early-stage price volatility at successive stages of processing.

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