Current Price Topics

PPI Industry or

Commodity Data: Which 

Better Suits Your Needs?

1

Producer Price Index: Second Quarter 2010

U.S. Bureau of Labor Statistics August 2010 Volume 1, Number 7

“Why does BLS publish Producer Price Index 

(PPI) data using both industry and commodity 

classifications?1

 What are the differences between the two and which is more appropriate 

to meet my needs?” These are common questions asked by users of PPI data. This quarter’s 

Focus on Prices and Spending: Producer Price 

Index examines the differences between the 

two systems and offers some guidance regarding when one would be preferable over 

the other. On a theoretical basis, industry 

indexes measure price changes based on the 

industry that produces the product or provides the service, whereas commodity indexes 

measure price changes based solely on the 

commodity or service itself, regardless of the 

type of company producing or providing it. In 

practical terms, though, there are additional 

subtle differences that may lead users to prefer one set of data over the other.

Although PPIs are organized into two very different classification systems, both structures 

draw from the same pool of price information 

provided to BLS by survey respondents. The 

price quotations that form the basis of the 

PPI dataset are sampled, collected, and updated based on their industry of origin, with 

industries defined according to the North 

American Industry Classification System (NAICS).2

 Industry-based PPIs exist for specific 

products of industries, industries in their entirety, as well as for groupings of industries, 

and date to the early to mid-1980s. Within 

each covered industry, PPI calculates aggregate indexes for both primary products and 

secondary products. Primary products are 

those that are principally, though not always 

exclusively, made by an industry—typically 

those products that are a company’s main 

line of business. For example, pharmaceutical preparations are the primary products of 

the pharmaceuticals manufacturing industry 

(NAICS 325412). Secondary products indexes 

incorporate prices for items that are primary 

to some other industry; for example, management consulting services (NAICS 54161)

provided by companies classified in the 

certified public accounting industry (NAICS 

541211).

The commodity-based classification structure produced by PPI is unique to BLS, and 

there are continuous data in some specific 

categories dating back to 1913. Many improvements to commodity indexes have 

been implemented over time; the original 

calculations were an unweighted average for 

only about 250 commodities. However, the 

underlying notion that all products can be 

organized under a commodity-based structure employing progressive levels of detail 

remains to this day. The current PPI com-
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modity-based publication structure includes 

more than 4,000 indexes and employs gross 

value-of-shipments weights.3

The commodity-based classification system 

organizes products by material composition 

and level of fabrication for goods and by similarity of service for services producers, allowing users to track changes in selling prices for 

products irrespective of industry of origin. At 

the most detailed level of publication, which 

PPI refers to as cell level indexes, similarly 

titled industry and commodity indexes may 

or may not exhibit similar price movements. 

If a particular commodity is produced nearly 

exclusively by one industry, then the comparably titled industry and commodity indexes 

will display very similar index movements. 

The industry and commodity indexes for cigarettes provide a good example, because essentially all domestically produced cigarettes 

are made by manufacturers classified under 

NAICS 312221, cigarette manufacturing. In 

contrast, for some products or services, more 

than one industry maintains substantial production, and as a result, cell level commodity indexes can move quite differently than 

similarly titled industry counterparts. For example, there exists sizable production of cold 

finished steel bars by both the iron and steel 

mill and the rolled steel shape manufacturing 

industries. As a result, the commodity index 

for cold finished steel bars, which combines 

price quotations from both industries into 

a single commodity index, provides a more 

complete picture of cold finished steel bars’ 

price movements.

Users searching for indexes that measure 

changes in prices received by industries or 

groupings of industries, and users looking 

for price movement data that correspond 

with other data organized by industry (such 

as revenue figures or industrial production 

statistics), will find PPI data organized by 

NAICS particularly useful. In contrast, users 

wishing to track changes in prices for specific 

products, services, or groupings of products 

or services irrespective of industry of origin 

and users interested in historical data prior 

to 1980 will find that commodity-based PPIs 

are a more relevant measure of inflation. In 

addition, the Internal Revenue Service recommends the use of PPI commodity data for last 

in–first out (LIFO) inventory valuation purposes when filing business tax returns.4

 Because 

commodity indexes are organized by material 

composition and level of fabrication for goods 

and similarity of service for services producers, they are capable of providing a more 

complete picture of price movement through 

expanded coverage of producers across multiple industries.

The decision to use one classification system 

rather than the other also is influenced by 

index availability. Due to the underlying differences between the industry and commodity 

classification systems, many aggregate indexes exist under only one of the structures. 

From an industry standpoint, sector level 

indexes such as the PPIs for the net output of 

total mining, total manufacturing, and selected health care industries provide meaningful 

data for groupings not available by commod-
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ity.5 Similarly, certain commodity index aggregations, such as the commodity indexes for 

industrial chemicals, lumber, and transportation of freight and mail cannot exist under the 

more rigidly defined, industry-based classification schema.

Prices received by producers of crude goods 

fell 6.2 percent in the second quarter of 2010, 

after climbing 8.2 percent in the first quarter 

of 2010. Leading this reversal, the index for 

crude energy goods dropped 9.2 percent following a 9.0-percent rise in the first quarter 

of 2010. Also contributing to the crude goods 

downturn—though to a lesser degree—prices for both crude foodstuffs and feedstuffs 

and for crude nonfood materials less energy 

fell in the second quarter after advancing in 

first quarter. (See chart 1.) The intermediate 

goods index, which tracks price changes for 

processed goods for business demand, rose 

less in the second quarter than in the previous quarter. The index for intermediate energy 

goods turned down, while price increases 

slowed for intermediate goods other than 

foods and energy. (See chart 2.) The finished 

goods index fell after rising in the first quarter of 2010 due to downturns in prices for 

finished energy goods and consumer foods.6

(See chart 3.)

Economic background

Reflecting signs of uncertainty in the economy, PPIs for finished, intermediate, and crude 

goods shifted course by mid 2010—some PPIs 

turned down while others advanced at much 

Current Price Trends

Second Quarter

2010 Led by Falling Prices 

for Crude Goods; PPIs

Reverse Course

8.2

5.0

9.0

11.8

-6.2

-5.0

-9.2

-2.6

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

Overall Food Energy Core

Percent change

Dec 09 - Mar 10

Mar 10 - June 10

SOURCE: U.S. Bureau of Labor Statistics

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

core crude goods, seasonally adjusted
4

slower rates—following steep run-ups that 

began in early-to-mid 2009. Prices for unprocessed commodities tend to be sensitive 

to even subtle shifts in the economy, often 

resulting in quick adjustments in prices for 

crude goods. 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.7

Displaying a shift similar to those in PPIs, gross 

domestic product (GDP) in 2009 showed consistent improvement, but by the first quarter 

of 2010, GDP growth slipped to 3.7 percent, 

compared with 5.0 percent in the fourth quarter of 2009. This deceleration mainly was due 

to weak residential and nonresidential fixed 

investment in structures (that is, in construction).8

 In the second quarter GDP figures 

continued their slide, with the growth rate 

slipping to 2.4 percent.

Events in recent months point to the potential 

for continued economic uncertainty. The U.S. 

housing market continues to sputter as evidenced by the June 23 new home sales report 

that stated sales of new single-family houses 

fell 32.7 percent from April to May 2010, and 

18.3 percent compared with their May 2009 

level.9

 In addition, the financial crisis in Greece 

contributed to a drop in the value of the 

European currency relative to the U.S. dollar10 

and fueled speculation in the United States 

of a worsening trade balance. In contrast, 

2.4

-1.4

4.9

2.1

0.3

1.1

-2.1

0.9

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Overall Food Energy Core

Percent change

Dec 09 - Mar 10

Mar 10 - June 10

SOURCE: U.S. Bureau of Labor Statistics

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

core intermediate goods, seasonally adjusted

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corporate profits and industrial production 

have improved, suggesting that the weak construction and foreign trade sectors remain the 

main hindrance to a more robust economic 

recovery. Total industrial production climbed 

7.6 percent from May 2009 to May 2010, with 

gains observed in most market groups,11 and 

corporate profits in the first quarter of 2010 

were, on average, 34.0 percent higher than 

their year-ago levels.12

Crude goods

The Producer Price Index for Crude Materials 

for Further Processing declined 6.2 percent 

in the 3-month period ending in June 2010 

subsequent to an 8.2-percent advance in the 

3-month period ending in March. Accounting for about half of the broad-based second 

quarter downturn, prices for crude energy materials fell 9.2 percent after climbing 9.0 percent in the previous quarter. The indexes for 

crude foodstuffs and feedstuffs and for crude 

nonfood materials less energy fell 5.0 and 2.6 

percent, respectively, subsequent to posting 

gains in the 3-month period ending in March.

The index for crude energy materials fell 9.2 

percent from March to June, compared with 

a 9.0-percent gain for the 3-month period 

ending in March. Prices for crude petroleum 

decreased 8.0 percent following a 15.4-percent rise in the preceding quarter. The index 

for natural gas also turned down, declining 

15.0 percent after rising 7.1 percent in the first 

quarter of 2010. In contrast, prices for coal 

moved up 3.8 percent in the 3-month period 

ending in June, following a 4.4-percent decline in the first quarter of 2010.

The index for crude foodstuffs and feedstuffs 

declined 5.0 percent from March to June, 

following a 5.0-percent advance in the previ1.6

3.1 3.4

0.5

-0.9

-3.0 -2.8

0.5

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

Overall Food Energy Core

Percent change

Dec 09 - Mar 10

Mar 10 - June 10

SOURCE: U.S. Bureau of Labor Statistics

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

core finished goods, seasonally adjusted
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ous quarter. Prices for slaughter cattle fell 0.5 

percent in the second quarter of 2010 subsequent to a 15.7-percent jump from December to March. The indexes for fresh and dry 

vegetables, slaughter hogs, milk (for fluid use), 

ungraded chicken eggs, and for both unprocessed finfish and shellfish also decreased 

from March to June subsequent to advancing in the first quarter of 2010. In contrast, 

the decrease in the index for corn slowed to 

8.0 percent in the 3-month period ending in 

June after falling 16.3 percent in the previous 

3-month period. Prices for soybeans turned up 

after declining in the first quarter of 2010.

The index for crude nonfood materials less 

energy turned down 2.6 percent in the 

3-month period ending in June following an 

11.8-percent gain in the previous 3-month 

period. The index for iron and steel scrap fell 

3.5 percent following a 35.1-percent hike in 

the first quarter of 2010. From March to June, 

prices for both corrugated and mixed wastepaper, nonferrous scrap, and pulpwood also 

decreased after advancing in the previous 

3-month period. Prices for hides and skins rose 

less than in the December-to-March period. In 

contrast, the index for construction sand and 

gravel turned up 1.3 percent in the second 

quarter after falling 1.1 percent in the preceding 3 months. Prices for corn fell less than in 

the first quarter.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components increased 

0.3 percent in the 3-month period ending in 

June 2010 subsequent to a 2.4-percent advance in the 3-month period ending in March. 

Price increases for intermediate materials less 

foods and energy slowed to 0.9 percent from 

March to June from 2.1 percent from December to March. The index for intermediate energy goods decreased 2.1 percent during the 

second quarter of 2010, after climbing 4.9 percent in the previous quarter. In contrast, prices 

for intermediate foods and feeds increased 1.1 

percent in the 3-month period ending in June 

following a 1.4-percent decline in the previous 

3-month period.

The index for intermediate energy goods 

declined 2.1 percent from March to June after 

rising 4.9 percent from December to March. 

Prices for gasoline moved down 10.9 percent 

subsequent to a 5.2-percent gain in the first 

quarter of 2010. The indexes for diesel fuel, jet 

fuel, liquefied petroleum gas, lubricating oil 

materials, natural gas to electric utilities, and 

heating oil also turned down in the second 

quarter of 2010. In contrast, prices for industrial electric power advanced 1.6 percent in 

the 3-month period ending in June, compared 

with a decline of 1.2 percent in the previous 

3-month period.

The index for intermediate goods less foods 

and energy advanced 0.9 percent in the 

3-month period ending in June following a 

2.1-percent gain in the prior 3-month period. 

From March to June, higher prices for both 

hot and cold rolled steel sheet and strip, thermoplastic resins and materials, paper boxes 

and containers, building paper and building 
 

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

board mill products, and woodpulp outweighed lower prices for basic organic chemicals and for copper and brass mill shapes.

The index for intermediate foods and feeds 

increased 1.1 percent in the second quarter 

of 2010 following a 1.4-percent decline in the 

first quarter. Prices for beef and veal rose 14.8 

percent from March to June subsequent to 

an increase of 6.9 percent from December to 

March. The indexes for formula feeds; corn, 

cottonseed, and soybean cake and meal; and 

confectionery materials decreased at slower 

rates compared with the first quarter. Prices 

for natural cheese (except cottage cheese) 

turned up from March to June. In contrast, the 

index for pork moved up 2.6 percent in the 

3-month period ending in June after climbing 

10.4 percent in the preceding 3-month period. 

Prices for portion control meats also rose less 

in the second quarter and the index for processed eggs turned down after rising in the 

first quarter.

Finished goods

The Producer Price Index for Finished Goods 

declined 0.9 percent from March to June 

after rising 1.6 percent in the previous 

3-month period. Prices for finished energy 

goods led this downturn, falling 2.8 percent 

subsequent to climbing 3.4 percent from 

December to March. The index for finished 

consumer foods also turned down, dropping 

3.0 percent in the 3 months ending in June 

following a 3.1-percent increase in the prior 3 

months. Prices for finished goods other than 

foods and energy moved up 0.5 percent in 

both quarters of the first half of 2010.

The index for finished energy goods moved 

down 2.8 percent in the 3 months ending in 

June compared with a 3.4-percent advance 

from December to March. Prices for liquefied 

petroleum gas fell 11.5 percent in the second 

quarter following a 7.1-percent advance in 

the prior 3-month period. The indexes for 

gasoline, home heating oil, residential natural gas, diesel fuel, and kerosene also turned 

down after rising in the 3 months ending 

in March. In contrast, prices for residential 

electric power increased 2.2 percent from 

March to June after no change in the previous 3-month period.

The index for finished consumer foods decreased 3.0 percent in the second quarter of 

2010 following a 3.1-percent increase in the 

first quarter. Leading this downturn, prices for 

fresh vegetables (except potatoes) dropped 

48.9 percent from March to June, more 

than reversing a 47.5-percent advance in 

the 3-month period ended March 2010. The 

indexes for eggs for fresh use, soft drinks, finfish and shellfish, and processed poultry also 

turned down after moving up in the 3 previous months. Prices for pork advanced less in 

the 3 months ending in June than in the prior 

quarter. Conversely, the rise in the index for 

beef and veal accelerated to 14.8 percent in 

the second quarter from 6.9 percent in the 

first quarter of 2010. Prices for natural cheese 

(except cottage cheese) and hot breakfast cereals turned up from March to June after falling in the 3-month period ending in March.
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The index for finished goods less foods and 

energy moved up 0.5 percent for the second 

consecutive quarter. In the 3-month period 

ending in June, rising prices for cigarettes, 

pharmaceutical preparations, civilian aircraft, 

converted paper and paperboard products, 

tires, and heavy motor trucks more than offset 

declines in the indexes for light motor trucks, 

computers and related equipment, and communication and related equipment.

Trade industries

The Producer Price Index for the Net Output of 

Total Trade Industries declined 2.3 percent in the 

second quarter of 2010 after rising at the same 

rate in the first quarter. (Trade industry PPIs 

measure changes in margins received by wholesalers and retailers.) Leading this downturn, 

margins received by durable goods wholesalers 

fell 8.5 percent in the second quarter following a 

5.0-percent increase in the prior quarter. Margins received by family clothing stores, general 

merchandise stores, and supermarkets also decreased following advances in the first quarter 

of 2010. The margin index for nondurable goods 

wholesalers inched up 0.1 percent in the second 

quarter after climbing 5.9 percent in the preceding quarter. In contrast, margins received by 

gasoline stations moved up 3.4 percent following a 21.7-percent drop in the first quarter. The 

margin indexes for discount department stores 

and home improvement centers also turned up 

in the second quarter.

Transportation and warehousing industries

The Producer Price Index for the Net Output 

of Transportation and Warehousing Industries 

increased 1.6 percent in the second quarter of 

2010 following a similar rise of 1.7 percent in 

the first quarter. During the second quarter, 

higher prices received by the industries for 

long distance general freight trucking, scheduled air transportation, line-haul railroads, couriers, deep sea freight transportation, general 

warehousing and storage, and inland water 

freight transportation outweighed lower 

prices received by the industry for coastal and 

Great Lakes freight transportation.

Traditional service industries

The Producer Price Index for the Net Output 

of Total Traditional Service Industries advanced 

1.0 percent in the second quarter of 2010 

after edging up 0.1 percent in the first quarter. 

Leading this acceleration, prices received by 

the depository credit intermediation industry group climbed 6.5 percent in the second 

quarter following a 4.3-percent drop in the 

previous quarter. The indexes for non-casino 

hotels and motels and for wired telecommunications carriers also turned up after falling in 

the first quarter. Prices received by the investment banking and securities dealing industry 

rose more in the second quarter than they 

had in the first. In contrast, prices received by 

direct health and medical insurance carriers 

advanced 0.4 percent in the second quarter 

after rising 2.6 percent in the prior quarter. 

The industry index for offices of lawyers also 

moved up less than it had in the first quarter. Prices received by general medical and 

surgical hospitals and by portfolio managers inched down after increasing in the prior 

quarter.

8
Further information is available from the

PPI Section of Index Analysis and Public 

Information, at ppi-info@bls.gov or

(202) 691-7705.

Notes

1

 PPI industry data are found in Table 5 and commodity data are found in Table 6 of the PPI Detailed Report.

2

 The North American Industry Classification System (NAICS) is administered by the U.S. Census Bureau. For more information 

about NAICS, visit http://www.census.gov/eos/www/naics/index.html.

3

 A handful of commodity-based PPIs for physical products provide data back to 1910s and 1920s, with 30- to 40-year histories 

common for most others. Commodity-based, where-ever-provided services indexes were introduced into the PPI in 2009.

4

 See IRS form 970 at http://www.irs.gov/pub/irs-pdf/f970.pdf.

5

 PPIs organized by industry include a concept called net output weighting, whereas PPIs organized by commodity grouping are 

sometimes hampered by their use of gross weights. In short, gross weights can lead to multiple counting of price change at successive levels of aggregation, although net output weighting corrects for this flaw. For more information on this topic, see pages 7 

to 9 at http://www.bls.gov/opub/hom/pdf/homch14.pdf, the PPI methodology chapter from the BLS Handbook of Methods.

6

 Price movements for PPIs described in this text include preliminary data for the months of April 2010 through June 2010. All 

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

7

 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.

8 Gross Domestic Product: Second Quarter 2010 (Advance Estimate), BEA 10–37 (Bureau of Economic Analysis, July 30, 2010), 

at (http://www.bea.gov/newsreleases/national/gdp/2010/pdf/gdp2q10_adv.pdf), page 11.

9 New Residential Sales in May 2010, CB10-92 (U.S. Department of Commerce, June 23, 2010), at (http://www.census.gov/

const/newressales_201005.pdf).

10 See Reuters.com at (http://www.reuters.com/finance/currencies/quote?srcAmt=1&srcCurr=EUR&destAmt=&destCurr=

USD) for a chart of euro to U.S. dollar exchange rates.

11 Industrial Production and Capacity Utilization, G.17 (419) (Board of Governors of the Federal Reserve System, June 16, 

2010), Table 1 (page 8), at (http://www.federalreserve.gov/releases/g17/20100616/).

12 Gross Domestic Product: First Quarter 2010 (Third Estimate), BEA 10–31 (Bureau of Economic Analysis, June 25, 2010), at 

(http://www.bea.gov/newsreleases/national/gdp/2010/pdf/gdp1q10_3rd.pdf), page 13.

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