[RESIGENE Continuec—roiative importance of selecied Producer Price Index commodity groupings by slage of processing,

based on 1992 and 1987 weights, December 1995
Commoatty croup 1992 13 Percent
code weight (revised) change
Intermediate materials,
‘suppiles, and components 100.000 100.000
61302 ther inorganic chemicals 791 803 15
0614 ‘Basic organic chemicals 3.471 3.270 6.1
061401 Primary basic organic chemicals 785 62 26.2
061402 Intermediate basic organic chemicals 625 603 36
061403 Miscellaneous basic organic chemicals .. 2.080 2.045 7
0621 Prepared paint 807 865 +47
0622 AtS 445 47
0631 459 381 205
064 103 083 108
0652 623 493 61
065201 282 280
065202 281 233 12.0
066 Plastic resins and materials . 2.053 1.976 39
071102 ‘Synthetic rubber 276 266
0721 Plastic construction products a7 7120
sit 1.007
0812 336
082 1.529
083 504
o91t 442
0913 2.399
0914 1333
082 227
1017 ‘Steet mill products ....
101702 ‘Semifinished steel mill products . 225
101703, Hot rolied sheet and strip, including tin mil 1124
101704 Hot rolled bars, shapes, and structural shapes 687
101705, Stee! wire... 125
101707 Cold rolled steel sheets and stripe 802
101708 Cold rolled steet bars .. 122
1022 Primary nonferrous metals 1.008
102201 Primary nonterrous metals, 957
402202 Precious metas ... 051
1025 Nonferrous mill shapes 1.484
1026 Nonferrous wire and cable .. 831
105 Plumbing fixtures and brass fittings 263
106 Heating equipment .. 268
107 Fabricated structural metal products 2617
4088 Fabricated ferrous wire products .. 360
1089 Other miscellaneous metal products. 2.288
108905 Other metal products .. 1.580
1148 Air conditioning and refrigeration equipment 743 798 7
Metal valves, except fluid power 335 320 47
Wiring devices .. AT2 522 08
627 545, 3.3
382 385 -8
288 338 14.3
1.190 1.466 -18.8
229 220 41
173 1195 “113
100,000 100.000 oe
aM 513 63.9
931 973 43
408 370 10.5
483 873 757
2.032 2.056 12
6.131 6.455 5.0

Monthly Labor Review July 1996 17



PPI 1992 Weights

duced supplies stemming from logging restrictions in the
Pacific Northwest. The relative importance of plumbing fix-
tures and brass fittings declined more than 19 percent due to
the construction slowdown, as well as a shift in consumer
tastes from traditional metal and brass products to plastic-
type plumbing products. The relative importance of concrete
products and cement fell about 19 percent and 14 percent,
respectively; these industries also suffered from the reces-
sion-dominated construction slowdown. Millwork shipments
declined almost 16 percent, and the relative importance of
nonferrous wire and cable also dropped significantly.

In contrast, the relative importance of plastic construc-
tion products increased 21 percent as their use, principally
to replace metal pipes in plumbing fixtures, grew substan-
tially due to their durability and the perception that they
were better able than metal to reduce contaminants, espe-
cially in consumable water.

The relative importance of durable manufacturing mate-
rials fell 3.5 percent, to 11.189 as of December 1995. A sub-
stantial decrease of more than 20 percent was recorded for
nonferrous mill shapes as slow recoveries, particularly in
the automotive and construction industries in the wake of
the 1990-91 recession, reduced demand. The categories of
cement, cold rolled steel sheets and strips, prepared paint,
and plywood also declined, again reflecting the slowdown
in the construction industry and the general softness of the
overall economy following the recession.

The relative importance of primary nonferrous metals, how-
ever, increased almost 20 percent. Aluminum shipments grew
drastically as inventory levels on the London Metal Exchange
reached all-time records in every month in 1992, while the
weak dollar helped push exports to the Far East up dramati-
cally. Domestic copper shipments were aided by supply prob-
lems in Zaire, another major copper producer, and increased
demand from China, which has a limited production capa-
bility and needs raw copper to continue its economic expan-
sion. Significant increases also occurred for building paper
and board, cold finished bars, and hardwood lumber.

Crude goods

There was relatively little shifting of relative importance
among the major components of crude goods as a result of
the 1992 weight revision. The relative importance of basic
industrial materials and crude foodstuffs and feedstuffs in-
creased, while that of energy materials declined.

The relative importance of crude nonfood materials less
energy rose 4.4 percent, to 23.736. The relative importance
of nonferrous metal ores swelled 92.3 percent, as civil un-
rest and labor strikes in many major mining countries re-
duced mining activity, thus increasing demand for U.S. mined
ore, both domestically and internationally. The relative im-
portance of wastepaper rose more than 80 percent from 1987

22 Monthly Labor Review July 1996

to 1992. This dramatic increase reflects growing recycling
efforts during the period, Many communities instituted man-
datory policies as Jandfilis rapidly filled up. The result was
an incredible surge in wastepaper shipments, overwhelming
recycling companies, which did not have enough capacity
to process all available supplies. The relative importance of
hardwood logs increased more than 30 percent as output
grew in the South, where most forest land is privately owned
and therefore not subject to Government regulations as strict
as those imposed on much of the public land in the West. A
greater number of Southern timber cuttings more than off-
set shortages of hardwood logs from the West. Significant
increases in relative importance were also recorded for leaf
tobacco and cattle hides.

In contrast, the relative importance of softwood lumber
declined more than 34 percent as the industry was hit by the
logging restrictions in the Pacific Northwest, but did not
expand in the South due to the absence of softwood forests.
In addition, the slowdown in construction resulted in de-
creased demand for many softwood lumber products, lead-
ing to even fewer shipments.

Te relative importance of crude foodstuffs and feedstuffs
climbed 2.6 percent, reaching 44.045. Within this cat-
egory, the relative importance of fresh fruits and melons
expanded by 63.9 percent. Strong domestic demand and in-
creased exports resulted in a record value for the 1992 apple
crop. Apple exports have been increasing each year since
1985. In 1992, reduced European supplies further spurred
demand for American apples. Apple exports have also ex-
ploded to many countries in the Far East and Latin America
since 1988, when trade barriers were reduced. In addition,
mild weather resulted in many California growers record-
ing larger than average harvests for many fruits. The rela-
tive importance of citrus fruit increased more than 50 per-
cent as the planting area in Florida grew steadily from slightly
more than 500,000 acres in 1986 to about 800,000 acres in
1992.” The relative importance of slaughter hogs rose nearly
37 percent, thanks in part to record high production in 1992.
Imports declined, with domestic producers picking up the
slack. The relative weight of slaughter broilers advanced
16.2 percent as consumption of healthier meat products in-
creased and export demand, particularly to the Far East and
former Soviet countries, rose. Significant increases in rela-
tive importance also were recorded for raw cane sugar and
fresh vegetables, except potatoes.

In contrast, the relative importance of Irish potatoes for
processing fell 15.7 percent; although production increased,
lower prices drove down the value of shipments to levels
that lagged behind those reached in the late 1980s. The rela-
tive importance of unprocessed and packaged fish declined
almost 16 percent; per-capita consumption declined from
16.2 pounds in 1987 to 14.8 pounds in 1992 as Government



ing intermodal transportation services sector has also eaten
into truck trailer usage. The relative importance of construc-
tion machinery and equipment fell 12.1 percent as slow re-
covery from the recession and economic uncertainty resulted
in a surfeit of commercial space and excess inventories at
production plants. Demand expanded little for this equipment
between 1987 and 1992. The index for ships also registered
a considerable decline in weight over the 5-year period.

The relative importance of the finished consumer food
index rose 2.6 percent, registering 22.341 based on 1992
weights. The relative importance of young chickens increased
58.4 percent from 1987 to 1992. This reflected an increase
in production due partly to record exports, particularly to
the Far East, where healthy economies and increasing con-
sumption resulted in greater demand for poultry. The rela-
tive importance of turkeys also increased about 58 percent
over the 1987-92 period; this reflected a shift in consumer
tastes to healthier meat products, which resulted in an in-
crease in consumption of more than 23 percent, while prices
declined about 4 percent during the same period.‘ In addi-
tion, turkey exports increased more than 500 percent over
the period, as the lower prices and favorable exchange rates
made turkey a more competitive meat in world markets.’
The relative importance of fresh fruits and melons increased
57 percent as favorable weather in the West resulted in record
harvests with many crops maturing earlier than usual. In-
creased planted acreage, particularly for strawberries and
some citrus fruits, resulted in a near-record output. Poor over-
seas apple crops helped spur an increase in the domestically
grown product. In addition, the indexes for fresh and dry
vegetables, confectionery end products, pork, and pasta re-
corded significant weight increases.

By contrast, the relative importance of eggs for fresh use
dropped nearly 20 percent, as lower hatchings and more uses
for processed eggs reduced demand. This caused prices to
fall, further lowering the value of egg shipments. The rela-
tive importance of bakery products declined 18.5 percent as
a result of the shift from 1987 to 1992 weights; the change
reflected increased demand for lower priced goods. Con-
sumer tastes shifted away from fried items such as pies and
doughnuts toward healthier snack items. Sales of frozen
baked goods declined as consumers switched to goods that
did not require thawing or baking, while grocers limited
freezer space for bakery goods, preferring instead to increase
their space allocation for ice cream and other frozen des-
serts with a higher turnover rate. Decreases in relative im-
portance also occurred for coffee and milled rice, as well as
for shortening and cooking oils.

TT relative importance of finished energy goods in-
creased 0.6 percent, registering 13.443 based on 1992
weights. This category underwent a considerable structural
change since the previous weight update. Residential elec-

tric power and natural gas components were added to the
category in December 1990, with initial weights based on
Department of Energy data for the value of shipments of these
commodities in 1987. The weights were then moved forward
on the basis of price changes between 1987 and 1990, com-
piled by the Energy Department in accordance with the nor-
mal PPI procedure for determining annual changes in relative
importance,

The relative importance of residential electric power rose
12.4 percent. The two main factors accounting for this in-
crease were the growing economy as the U.S. emerged from
the 1990-91 recession and the differing weather conditions
in 1987 and 1992. The summer of 1992 was relatively warm,
which increased demand for electricity for cooling purposes,
whereas the mild winter of 1987 resulted in diminished elec-
trical demand.

Dw the 1987-92 period, the weights for both gaso-
line and heating oil (fuel oil no. 2) were relatively stable,
with heating oil increasing 1.1 percent and gasoline falling
6.6 percent. This stability was a result of the continued glut
of crude oil supplied primarily from international markets.
During the 1990-91 Persian Gulf crisis, prices for crude oil
almost doubled on the basis of fears of future shortages,
even though other major producers increased production to
offset the Iraqi and Kuwaiti losses. Following the Iraqi sur-
render, prices quickly fell to their original levels as the fears
subsided and then dropped even lower with additional oil
from the Middle East coming to market as countries began
to finance the rebuilding of Kuwait and the increased mili-
tary presence in the area.

The relative importance of residential natural gas dropped
more than 22 percent since the previous update. Natural di-
sasters took their toll on gas infrastructures in 1992, as pro-
duction fell in the wake of damage to pipelines by Hurri-
cane Andrew. Further, the winter of 1991-92 was relatively
mild, diminishing the demand for gas for heating purposes.

The weight for the index for consumer goods less food
and energy dropped 4.7 percent, recording a relative impor-
tance of 38.544. The index for footwear dropped more than
28 percent, as imports continued to erode the domestic mar-
ket share. Even though the demand for footwear increased
in 1992 as the United States emerged from the 1990-91 re-
cession, domestic output still declined relative to imports.
The phenomenon of increasing imports together with de-
clining domestic production has existed since 1988, when
orderly marketing agreements, which limited imports from
the Far East, expired.

The relative importance of household glassware declined
16.9 percent, as manufacturers switched production from
household glassware to the more profitable glass fibers for
the growing fiberglass products industry. Increasing imports
also eroded domestic producers’ market share. The relative

Monthly Labor Review July 1996 19



PPI 1992 Weights

Continued—Relative it ince of selected Producer Price Index commodity groupings by stage of processing,
based on 1992 and 1987 weights, December 1995
1987
‘Commodity 1992 nt Percent
code oounng weight ot, change
Continued—Crude materials 100.000 100.000

0131 ‘Slaughter cattle 11.935 11,898 3
0132 ‘Slaughter hogs 3.581 2.620 36.7
014102 ‘Staughier brollars/tryers 3.623 3.117 16.2
0142 ‘Slaughter turkeys 970 208 7A
0151 1.570 1.257 24.9
016 5.821 5.713 3.6
0181 1.200 1.329 27
018301 Soybean: 3.323 3.114 7
0192 Leaf tobacco .. 944 738 277
0223 Unprocessed and packaged fish .. 408 484 ~15.7
028201 Raw cane sugar ..... 464 ‘At8 11.0
0411 Cattle hides .... 818 485 274
051 Coal. 7.338 6.833 74
0531 Natural gas (to pipelines) 13,637 13,107 40
0561 Crude petroleum (domestic pr 11.244 14,393, 218
065202 Phosphates 328 281 16.7
085101 Softwood tage, bok, end timber 3.460 5.262 34.2
085102 337 257 at
085103 709 816 15.4
085104 135 145, 469
0912 940 521 20.4
1011 598 483 23.8
1012 3.919 3.760 42
1021 3.371 1.753 92.3
102102 1.540 943 63.3
102105 1.450 568 155.3
102301 975 1.254 222
102302 1.844 1.475 25.0
1921 Construction sand, gravel, and crushed stone 2.609 2.887 06

‘n.c. = not elsewhere classified, only for those major subproduct classes allocated to the respective stage-of-

Nore: Data on relative importance for commodity groupings shown here are processing groupings.

With the Nation’s health care expenditures increasing
about 70 percent between 1987 and 1992, and with a steadily
rising demand for exports of medical equipment, the rela-
tive importance of x-ray and electromedical equipment in-
creased more than 52 percent during the period. Shipments
of x-ray and electromedical equipment exhibit cyclical pat-
terns; after remaining steady through most of the mid-1980s,
they grew dramatically during the end of the decade and
into the 1990s. The relative importance of light trucks in-
creased 11.7 percent after the weight revision, reflecting con-
sumers’ infatuation with minivans and sport utility vehicles
as substitutes for large cars in the role of the primary family
vehicle. The index for agricultural machinery and equipment
also recorded a substantial weight increase.

In contrast, the relative importance of heavy trucks de-
clined 31.6 percent. Truck sales hit their peak in 1988, fol-
lowing the 1987 Census of Manufactures, in the aftermath
of trucking deregulation in the early 1980s. Sales were at
substantially lower levels in 1992 as a result of increased

18 Monthly Labor Review July 1996

Prices, as well as depressed demand, in the construction and
trucking industries,

The relative importance of printing trades machinery fell
almost 24 percent as slow growth in the economy and future
economic uncertainty forced users of such machinery to post-
pone new purchases. The relative importance of metal form-
ing machine tools declined 23 percent, while that of metal
cutting machine tools fell 11.8 percent. Both the metal form-
ing and metal cutting industries exhibit extremely cyclical
patterns and are usually among the first sectors of the
economy to suffer with the onset of a recession and the last
to rebound as the recession ends. At the time of the 1992
census, these industries still had not fully recovered from
the 1990-91 recession, resulting in lower relative impor-
tances for each than in 1987. The relative importance of the
truck trailer category decreased 16.7 percent, mainly be-
cause of falling demand resulting from declining trailer traf-
fic. While most of the reduction in traffic stemmed from
the1990-91 recession, increased competition from the grow-



mercial and industrial customers to purchase gas from other
sources and pay a fee to the utility companies to transport
the gas through their pipelines. The result was declining natu-
tal gas shipments from utilities, which gradually went from
being suppliers to being middlemen.

The relative importance of liquid asphalt declined about
22 percent. Shipments of this product are largely dependent
on the construction industry, and in particular, on public road
construction. In 1987, the amount spent on road construc-
tion was extremely high, thanks in part to the Surface Trans-
portation Assistance and Uniform Relocation Act of that year,
which renewed previous Federal highway aid programs
through 1991. This legislation was not immediately renewed
in 1991, however, thus delaying its further implementation
until after the 1992 census survey was conducted. The delay
resulted in a dramatic dropoff in the allocation of Federal
highway funds in 1992. In addition, State and local govern-
ment financial difficulties limited available funds for public
construction projects. Significant declines in relative impor-
tance were also observed for kerosene, residual fuel, and
gasoline.

relative importance of nondurable manufacturing ma-
terials increased 1.1 percent, registering 16.240 as of
December 1995. Within this category, the relative impor-
tance of medicinal and botanical chemicals rose more than
20 percent. Consumer health concerns have led to an in-
creased interest in natural products, which has spurred com-
panies to add more natural and herbal chemicals to their
products. In addition, there has been an increase in pharma-
ceutical research into disease cures using extracts from natu-
tal flora.

The relative importance of phosphates increased 12 per-
cent from the previous figure, as a strong export market in
the late 1980s boosted shipments dramatically. While ship-
ment levels have stabilized since 1990, they remain consid-
erably higher than when the previous census was conducted
in 1987. The relative importance of inedible fats and oils
increased about 11 percent as export demand, particularly
from the Far East, rose steadily since 1987, Noteworthy in-
creases in relative importance were also observed for leather
and basic organic chemicals.

The relative importance of synthetic fibers, on the other
hand, declined more than 23 percent as the trend of con-
sumers favoring natural fibers in apparel and household
goods continued. The use of synthetic fibers in nonhousehold
manufactured goods also declined as the 1990-91 recession
slowed demand for consumer products manufactured with
these fibers. Additionally, the closure in 1990 of a major
synthetic fiber supplier further constrained industry output.
The relative importance of gray fabrics fell 10.6 percent as
the combination of the recession and overcapacity in the
industry severely depressed output in the early 1990s. No-

ticeable decreases in relative importance also were regis-
tered for the categories of paint materials and prepared paint.

The relative importance of the foods and feeds category
expanded 1.0 percent, registering 4.845 as of December
1995. This increase was led by natural and processed cheese,
whose relative importance rose 19 percent since the last weight
revision. Commercial manufacturers of frozen entrees and
snack-type crackers utilized more cheese in their products, thus
increasing shipment values from slightly less than $13 million
in 1987 to more than $16 million in 1992.” The relative impor-
tance of miscellaneous processed food grew 13.3 percent, re-
flecting a continued shift in consumer preferences from fast
food to partially prepared meals. Within the category, nonfrozen
perishable prepared foods, dairy product substitutes, peanut
butter, food colorings, and dry mix preparations registered
substantial increases. Considerable gains in relative impor-
tance were also observed for crude vegetable oils, miscella-
neous meat products, and prepared animal feeds.

In contrast, a decline of more than 21 percent was noted
for fluid milk products. Many dairy farmers left the industry
in the early 1990s when prices started to fall after reaching
peak levels in 1990. The result was diminishing supplies
and thus lower levels of shipments. The relative importance
of dry, condensed, and evaporated milk and of confection-
ery materials also declined significantly from 1987 to 1992.

relative importance of the construction materials cat-
egory dropped 10,2 percent, to 12.541 as of December
1995. Although mortgage rates fell from 10.2 percent in 1987
to 8.4 percent in 1992, total private construction activity
declined 3.4 percent, from almost 328,700 units in 1987 to
317,300 units in 1992, reflecting the economic uncertainty
that arose after the Persian Gulf conflict." Housing starts
declined from more than 1.6 million in 1987 to less than 1.2
million in 1992. Over the same period, the number of new
housing permits authorized fell from more than 1.5 million
to slightly less than 1.1 million."* Spending on private non-
residential construction also declined, reflecting high va-
cancy rates for commercial buildings in most major cities,
as well as more restrictive lending standards for real estate
development. The drop in the relative importance of con-
struction materials was driven by reduced shipments of
wood-derived products, as restrictive logging policies stem-
ming from environmental concerns in the Pacific Northwest
reduced supplies of raw materials. The relative importance
of plywood slumped 22 percent from 1987 to 1992. The de-
mand for plywood was also affected by changing consumer
tastes, with hardwood plywood falling out of favor as a pan-
eling material relative to gypsum board. Shipments of soft-
wood plywood declined as higher prices pushed many con-
sumers to search for substitute products.
The relative importance of softwood lumber fell 19.4 per-
cent, again reflecting the slowdown in housing starts and re-

Monthly Labor Review July 1996 21



PI 1992 Weights

Scott Sager

Scott D. Sager Is an
economist in the
Division of Producer
Price Indexes, Bureau
of Labor Statistics.

Effect of 1992 weights
on Producer Price Indexes

Updated weights reflecting 1992 values of shipments
of commodities resulted in increasing relative
importance for food at all stages of processing,

for energy at the finished and intermediate stages,
and for basic industrial materials at the crude stage

ffective with the release of data for Janu-

ary 1996, the weights used to construct

the Producer Price Index (pr!) were up-
dated to reflect the 1992 values of shipments of
commodities. From 1992 through 1995, weights
were based on 1987 values of shipments. The
Ppt is constructed by obtaining the prices, each
month, of a set of goods representative of the
marketed output of domestic industries in some
designated base period. Although the weights of
items included in the pet change continuously
solely in response to different rates of price
change among the various items, production pat-
terns are influenced by factors other than price
changes, such as technological advancement and
changes in demand. It is therefore necessary pe-
tiodically to restore the representativeness of the
mix of goods that go into making up the prt to
the current mix of domestic outputs by compre-
hensively recomputing the weights of prt items
based on the value of shipments in a more re-
cent period.

Weights for specific products are based on
their value of shipments, as measured by the
Census of Manufactures, Census of Mining,
Census of Services, and Census of Agriculture.’
For overall groupings of products, relative im-
Portance figures are calculated by aggregating
specific product weights together, resulting in a
weighted average of the components,

The 1996 weight revision affected all series
within the Producer Price Index, including tra-
ditional commodity code indexes, industry net

output indexes, stage-of-processing indexes
based on both the commodity and the net out-
put classification system, durability-of-product
indexes, and special commodity groupings. The
Proportional allocation of commodity series to
specific stage-of-processing categories remains
based on 1972 input-output data.

Relative importance data

Producer Price Index weights are published in
the form of relative importance data. This type
of data represents a good’s or grouping’s value
of shipments as a proportion of the total value
of shipments for a broader category. Shifts in
relative importance resulting from a major
weight revision are the result of changes in pro-
duction volume and selling price for individual
series, relative to the average change of all other
items within a broader category.

From 1987 to 1992, the aggregate value of
shipments of commodities that make up the three
Major stage-of-processing categories (finished
goods, intermediate goods, and crude goods) in-
creased about 20 percent. Thus, an individual
item whose value of shipments also increased
about 20 percent would have a revised relative
importance about the same as its former rela-
tive importance. By contrast, an item whose
actual value of shipments remained the same
from 1987 to 1992 would have a revised rela-

tive importance about 20 percent less than its
former relative importance.

Monthly Labor Review July 1996 13



regulations limited fishing grounds and the size of catches,
resulting in a 12-percent increase in imports in order to keep
up with demand." The relative importance of alfalfa hay
also declined significantly as prices for alternative animal
feeds dropped, making them more economical as nutrients
for livestock.

The relative importance of crude energy materials fell 6.2
percent, to a level of 32.219. The weight for crude petro-
Jeum was responsible for this contraction, dropping 21.9
percent for many of the reasons discussed earlier, Addition-
ally, field production declined more than 14 percent, while

Footnotes

imports rose more than 30 percent, as many Middle Eastern
countries increased production in order to capture lost rev-
enue and gain currency to rebuild following the Gulf War.'*
The relative importance of coal grew 7.4 percent as demand
increased from electric utilities, which rely principally on
hydroelectric plants to generate much of their power. In
1992, dry conditions in the Western States diminished water
levels, and thus hydroelectric activity, forcing many utili-
ties to burn coal as a supplemental power source. The rela-
tive importance of natural gas to pipelines increased about
4 percent. Q

' For a detailed analysis of the concepts underlying pt weights, see BLS
Handbook of Methods, Bulletin 2414 (Bureau of Labor Statistics, Septem-
ber 1992), Chapter 16, “Producer Prices.”

2 Economic Report of the President—February 1994 (Washington, vc,
February 1994).

> U.S, Industrial Outlook 1993 (U.S. Department of Commerce, Interna-
tional Trade Administration, January 1993).

« A comprehensive listing of the revised (1992) and former (1987)
weights can be found in the tables of relative importance that appear in
Supplement to Producer Price Indexes Data for 1995 (Bureau of Labor
Statistics, forthcoming, August 1996). This supplement includes three tables
of data on relative importance: table 10, which gives the relative impor-
tance of classes of subproducts, by detailed stage-of-processing category;
table 11, which shows the relative importance of commodity groupings by
major stage-of-processing category; and table 12, which lists the relative
importance of commodity groupings and individual items with respect to
the all-commodities index.

5 Economic Report of the President, table B-55.

§ Poultry Yearbook 1995, Statistical Bulletin 927 (U.S. Department of

Agriculture, Economic Research Service, December 1995), table 146. See
also Ron L. Hetrick,"Why did employment expand in poultry processing
plants?” Monthly Labor Review, June 1994, pp. 31-34.

7 Poultry Yearbook 1995, table 145.

"US. Industrial Outlook 1993.

» Electric Power Monthly (U.S. Department of Energy, Energy Informa-
tion Administration, December 1993), table 51.

© U.S. Industrial Outlook 1993.

TM Information obtained from the Federal Home Loan Mortgage Corpo-
ration; see Economic Report of the President, table B53.

" Economic Report of the President, table B-54.

Agricultural Outlook (U.S. Department of Agriculture, Economic Re-
search Service, November 1992).

Fisheries of the United States 1993 (U.S. Department of Commerce,
National Oceanic and Atmospheric Administration, National Marine Fish-
eries Service, May 1994).

'S Petroleum Supply Monthly (U.S. Department of Energy, Energy Infor-
mation Administration, December 1993), table S1.

Monthly Labor Review July 1996 23



PPI 1992 Weights

importance of tobacco products fell more than 16 percent to
1,972, reflecting a trend of continuously decreasing con-
sumption since 1987. Restrictions on where people can
smoke, the declining social acceptance of smoking, and
growing awareness of health risks related to smoking have
reduced domestic demand for tobacco. Export production
also declined in 1992 as companies licensed production to
overseas manufacturers. Another factor partially account-
ing for the decline in the relative importance of tobacco prod-
ucts has been a gradual switch to generic cigarettes, which
are less expensive than name brands, thus resulting in a lower
overall value of shipments.

The relative importance of girls’, children’s, and infants’
apparel declined more than 15 percent as imports increased
and consumer buying habits shifted to discount and off-price
stores, resulting in a lower value of shipments for these prod-
ucts, The relative importance of passenger cars fell 13.4 per-
cent, chiefly because of declining consumer confidence, economic
uncertainty in the wake of the recession of 1990-91, and stricter
financing terms. Also, as prices and quality increased through
the late 1980s and into the early 1990s, consumers tended to
retain their existing vehicles for longer periods.

The relative importance of platinum and gold jewelry
decreased as demand was restrained by the recession. Fi-
nancial difficulties forced several major jewelry retailers to
close many of their outlets in an attempt to cut costs, further
reducing shipments. The relative importance of periodicals
fell mainly because newsstand sales decreased as consum-
ers exhibited more cautious purchasing patterns during the
recession. Higher cover prices relative to subscription rates,
reduced display space for an increasing number of maga-
zines, and fewer outlets for publication sales diminished the
demand for periodicals further. The failure rate of maga-
zines picked up as advertising revenue declined in the wake
of the recession, postal costs increased in 1991, and compe-
tition from other types of media grew.

y contrast, the relative importance of sporting goods ex-
Bran 31.1 percent. Greater interest sparked by the 1992
Olympic games drove demand higher, as people sought to par-
ticipate in high-profile sports such as skiing, tennis, and hockey.
Shipments of golf equipment continued to grow with the sport’s
steady increases in popularity; the value of shipments for
golf equipment was almost 65 percent above the 1987 level."

The relative importance of home electronic equipment
increased more than 21 percent, fueled by rising demand for
big-screen televisions and home theater products. Shipments
of compact disc players have grown to the point where they
are almost as widely used as televisions and videocassette
recorders. This dramatic increase has also driven the audio
component upgrade market, in the form of greater demand
for higher quality amplifiers, receivers, and speakers. The
relative importance of prescription pharmaceuticals rose

20° Monthly Labor Review July 1996

about 14 percent. As the general population continues to age,
there is typically a greater utilization of medical care, of
which prescription drugs are a vital component. In addition,
many manufacturers raised prices during the 1987-92 pe-
riod, particularly for patented medications, in an effort to
offset hefty research and development costs.

Intermediate goods

The Producer Price Index for intermediate goods encom-
passes more items than do the indexes for the other stages
of processing. Consequently, the shifts in relative impor-
tance within the intermediate stage-of-processing category
exhibited a greater range than did those of finished goods or
crude materials. The most prominent increases were recorded
for the categories of energy goods, nondurable manufactur-
ing materials, and foods and feeds. In contrast, the relative
importance of construction materials and durable manufac-
turing materials declined.

The relative importance of intermediate energy materials
edged up 0.3 percent, to 12.501, in December 1995. That of
coke oven products increased more than 32 percent. Coke
oven products are used mainly in the steel-manufacturing
process. About half the ovens in use are more than 25 years
old and do not burn coke as efficiently as newer ovens do.
Although the Clean Air Act of 1990 requires that more envi-
ronmentally “friendly” production methods be introduced
by 1995, many companies did not feel compelled to invest
in new technology at a time when profits lagged due to low
steel prices. Thus, they continued to produce with existing
technology, purchasing additional fuel for their less efficient
ovens. In addition, the other widely used power source—
electricity—increased in price more than 10 percent during
the 1987-92 period.

The relative importance of liquefied petroleum gas rose
15.5 percent, principally due to strong demand for propane
and butane. One of the main uses of propane is in the drying
process for corn, and a record com harvest in 1992 boosted
demand dramatically. Liquefied petroleum gas is also used
in the production of feedstock, which increased, too, as a
result of the greater corn supply. Additionally, excess inven-
tories of relatively inexpensive butane were used for win-
ter-grade gasoline-blending operations. The relative impor-
tance of electric power advanced more than 10 percent as
demand increased among both commercial (15.6 percent)
and industrial (14.2 percent) users.

The relative importance of utility natural gas, however,
fell 38 percent. (Like the natural gas items, utility natural
gas was added to the category of finished goods in Decem-
ber 1990.) The principal force contributing to this dramatic
decline was the deregulation of the natural gas industry. Be-
fore 1987, commercial and industrial natural gas was pur-
chased exclusively from utilities. Deregulation allowed com-



PPI 1992 Weights

Continued—Relative importance of selected Producer Price Index commodify groupings by Hage of processing,

based on 1992 and 1987 weights, December 1995
1987
Commodity Grouping 1992 Percent
code weight ot, change

Finished goods 100.000 100.000 we
1264 Household flatware .... 022 022 0
1286 Lawn and garden equipment, except tractors 272 300 03
141101 Passenger cars .. 6.992 8.076 -13.4
141105 Light motor trucks 4.286 3.837 nN?
141106 Heavy motor trucks 953 1.994 31.8
1414 Truck trailers .. 265 318 ~16.7
142102 Civilian aircraft 3.351 2.058 63.1
1431 Ships ... 728 B12 10.6
144 Railroad equipment 214 133 60.9
1511 Toys, games, and chikiren’s vehicles 299 308 29
1512 Sporting and athietic goods 540 A12 3tt
152 ‘Tobacco products 1.972 2.372 16.9
155 Mobile homes 438 497 -11.9
159402 Jewelry, platinum, 0 (254. 301 15.6
159404 Costume Jewelry and novetties. 118 123 4

Intermediate materials,
supplies, and components 400,000 100.000

021203 253 242 45
0221 637 625 1.8
022101 312 an 3
022104 208 .200 45
022105 112 108 57
023 660 701 8
0231 248 315 21.3
0232 004 004 0
0233 282 237 19.0
0235 128 148 ~13.7
023502 072 078 89
023503 054 068 18.2
0253 220 227 3.4
0254 270 297 8.1
0264 214 204 49
0272 169 157 78
0289 178 158 13.3
029 1.554 1.472 58
091 562 730 23.0
032 996 898 42
033 735 822 -10.6
034 1.102 1.095 6
042 190 a7 73
052 107 081 92.1
0532 432 374 15.5
054 7.239 6.555 10.4
0542 4.087 3.527 15.9
0543 3.152 3.028 4a
055 817 1.477 37.9
0552 513 6868 25.2
0553 industrial natural gas .... 293 527 444
0554 Natural gas to electric utilities . a 264 68.0
0871 1.300 1.981 49
057202 019 026 24.0
057303 Jet fuels 1831 828 8
0574 si 42 O41
058 097 M4 14.8
061 4.487 4.301 43
0613 1.018 1.031 18
061301 Alkalies and chlorine ... F 228 =9
‘See footnotes at end of table.

16 Monthly Labor Review July 1996



Relative importance of selected Producer Price Index commodity groupings by stage of processing, based on
1992 and 1987 weights, December 1995
1987
Commodity Grouping 1992 weight Percent
code weight (reve change
Finthed goods 100,000 100.000
om Fresh fruits and melons .. 471 300 s70
0113 Fresh and dry vegetables 534 : .
017107 Eggs for trosh use 270 335 ~19.4
0211 Bakery products 1,888 2.328 ~18.5
0213 Milled rice .. 041 044 68
021402 Pasta produc 099 085 42
022101 1.574 1.583 -6
022104 Pork 1.056 1.017 38
022203 1.109 -700 58.4
022206 ys (228 143 58.0
0223 Finfish and shellfish 763 712 “12
023 Dairy products . 2.881 2.941 20
024 Processed fruits and vegetables 1.764 1.731 19
0285 Confectionery end products 1.201 1.143 61
0261 1.976 1.975 A
0262 2.003 2.022 -9
026301 508 548 77
0276 331 346 43
038101 Women's apparel. 4.084 4519 9.6
038102 Men's and boys’ apparel 1.718 1.881 87
038103 Girls’, children's, and infants’ apparel 343 404 “18.1
0382 Textile housefumishings 708 708 =3
043 Footwear ... 905 425 28.2
0541 Residential electric power 7.143 6.354 12.4
0551 Residential natural gas 1.794 2.311 22.4
0574 Gasoline 2.948 3.157 68
057302 Fuel oll no, 2 “470 485 14
0635 Pharmaceutical preparations, ethical (prescription) 1.812 1.692 138
0636 Pharmaceutical preparations, proprietary (over the counter) 519 578 102
0671 Soaps and synthetic detergents 702 am 1.3
0675 Cosmetics and other toilet preparations . 1.399 1.334 49
0712 Tires, tubes, tread, etc, 385 388 5.9
091501 Sanitary papers and health products 1.508 1.520 -8
093101 ‘Newspaper circulation 726 862 15.8
093201 Periodical circulation 72 740 26
0933 Book publishing ... 688 754 88
111 Agricultural machinery and equipment . 802 BAS 103
112 Construction machinery and equipment 625 7m “12.1
1137 Metalcutting machine tools 179 203 -11.8
1138 Metaitorming machine tool 077 100 23.0
1199 Tools, dies, jigs, fixtures, and independent molds 531 495 73
1141 Pumps, compressors, and equipment . 412 421 24
1144 Industrial material-handling equipment 548, 579 54
1151 Electronic computers 754 391 92.8
1162 Textile machinery. 1060 062 -32
1164 Paper industries machinery 13 108 66
1165 Printing trades machinery 160 210 -23.8
1174 Transformers and power regulators. 246 238 34
1176 ‘Communication and related equipment 1.826 1.891 3.4
117905 X-ray and electromedical equipment.. 545 357 52.7
1191 Oil field and gas fleld machinery 087 086 12
1192 Mining machinery and equipment .. 052 054 -37
1193 Office and store machines and equip 353 392 29
121 Household furniture .. 1.640 1.837 10.7
122 Commercial furniture 1.163 1.242 64
123 Floor coverings . 562 588 44
124 Household appliances .. 1.158 1.190 “27
125 Home electronic equipment 497 408 215
1262 Household glassware .. 069 083 16.9
See footnotes at end of table.

Monthly Labor Review July 1996 15



PPI 1992 Weights

The U.S. economy expanded at a robust pace between
1987 and 1992, with the gross domestic product increasing
33 percent during that period. Personal consumption expend-
itures rose more than 35 percent, industrial production rose
6.5 percent, and business investment expenditures increased
by more than a third. These factors combined to result in the
overall increase in value of shipments of about 20 percent
during the period.?

Example of weight shifts

The index for civilian aircraft (commodity code 142102)
May serve as an example as to how and why weights have
changed. The December 1995 relative importance of civil-
ian aircraft shifted from 2.055 under the 1987 weight base
to 3.351 under the 1992 weight base, an increase of 63.1
percent. There were several reasons for this change.

Economically, the Nation was coming out of a recession
in 1992 caused by the Persian Gulf crisis in late 1990 and
1991. The Middle Eastern conflict spurred a fear of interna-
tional terrorism, which manifested itself in reduced travel,
primarily by air. As fears subsided in 1992, air travel in-
creased, and airlines sought to obtain additional aircraft in
order to keep up with the increased air passenger demand.

During the 1987-92 period, shipments of military aircraft
declined as reductions in defense spending, both domesti-
cally and internationally, reduced military demand. As a re-
sult, companies were able to switch some of their resources
to producing civilian-type aircraft, take advantage of econo-
mies of scale, and increase production, as measured by value
of shipments, from about $12 billion in 1987 to almost $29
billion in 1992,

Between 1987 and 1992, the use of air cargo services as
an express alternative to the Postal Service also expanded
greatly. As a consequence of this expansion, more aircraft were
needed to keep up with the increased demand for services.

Overview of weight changes

The food sector was the only area in which weights expanded
across all stages of processing. Weights for the energy com-
ponents increased for finished and intermediate goods, but
declined for crude materials. Conversely, weights for the
“core” component (excluding food and energy) fell for both
finished and intermediate goods, while rising for the crude
component. Table 1 shows the relative importance of many
detailed items within the three stages of processing before
and after the shift to 1992 weights, as well as the percent
change between the 1987- and 1992-based relative impor-
tances of these items.‘

Many of the weight increases for various categories re-
flected rising industrial demand in 1992, as the United States
emerged from the recession of 1990-91. This happened, for

14 Monthly Labor Review July 199

example, for many nondurable manufacturing materials, such
as woodpulp, and for basic industrial materials, such as alu-
minum base scrap. Output in other industries expanded be-
cause advances in technology spurred demand. The result
was weight gains for items such as tools, dies, jigs, fixtures,
and industrial molds, as well as electronic computers, within
capital equipment.

Some categories, however, registered a diminished rela-
tive importance following the weight shift. For example, a
shift to foreign production during the 1987-92 period re-
sulted in a diminished relative importance for most apparel
categories, as well as for many fibers and yarns. Similarly, a
declining rural population manifested itself as a drop in ship-
ments of mobile homes. And weight declines in book pub-
lishing reflected decreased State and local government fund-
ing for education, resulting in reduced shipments of school,
library, technical, scientific, and professional books.

Finished goods

Within the category of finished goods, weights increased
for the capital equipment, consumer foods, and energy com-
ponents. Weights declined for consumer goods other than
food and energy.

The weight for capital equipment increased about 5 per-
cent as a result of the 1996 revision. The relative impor-
tance of capital equipment with respect to total finished
goods was 24.672 as of December 1995. Before the revi-
sion, the figure was 23.470 in that same month. The bur-
geoning force behind the weight increase was a rise in busi-
ness expenditures for new plants and equipment, from more
than $410 million in 1987 to almost $550 million in 1992.
In addition to the sizable weight increase for civilian air-
craft described earlier, the weight for electronic computers
almost doubled. This reflected a release of pent-up demand
following the 1990-91 recession. In order to benefit from
technological advances in the form of greater processing
power and speed, many corporations reinstated orders they
had canceled or deferred during that uncertain economic pe-
tiod. The Federal Government also dramatically increased
its computer purchases in an effort to modernize equipment
used in many departments. In addition, the demand for com-
puters for use at home expanded greatly, as lower prices
made products affordable to more of the population.

The relative importance of railroad equipment increased
60.9 percent with the inception of the revised weights. With
railroad operating revenues rising about 8 percent between
1987 and 1992, new equipment was purchased in order to
keep up with increasing demand. Additionally, as demand
for just-in-time delivery grew over the last few years, the
need for new models of specialty cars (for example, truck
trailers on flatbed cars) grew as well.

(Text continues on page 18.)