–Retransmitting Story Headlined 8:30 ET Wednesday
–Dec PPI -0.1%; Core PPI +0.3%.
–Export Demand from Europe ‘Has Slowed a Little,’ W/Demand Down,Dlr Up

By Denny Gulino

WASHINGTON (MNI) – The PPI core rate rose a firm 0.3% in December,
finishing a year in which it has risen more than 0.2% a month six times.

For the broadest measure of producer prices, the finished goods
index, there was a third decline of 2011 in December, of 0.1%,
but the PPI nevertheless ended the year up 4.8%, the most since 2007.

Boosting the December core rate were cars, trucks, pharmaceuticals
and cigarettes.

“These increase for cars and trucks are larger than in recent past
years,” senior BLS analyst Scott Sager told Market News International
just prior to publication. The seasonal adjustment factors expected
larger December discounts “which didn’t occur,” turning 0.1% decreases
for both into increases.

“It looks like you’re starting to see a recovery in automotive
sector,” he continued, “but you don’t know whether it’s a result of
significantly higher demand or supply issues foreign makers had to deal
with, lowering their inventories. Domestic automakers may not have had
to cut prices as much.”

In 2011, light truck prices rose 3.2% and new cars 2.5%. In 2010
both car and truck prices were down for the year. In 2009, truck prices
were up only slightly and car prices were down.

The year began with energy pushing up the price index and ended
with a shifting mix of core items beginning to take the lead, although
the core was unchanged in August and September in revised numbers, and
rose only 0.1% in November. In January, oil prices have moved back up
somewhat.

For pharmaceuticals, up 1.2% in December, the year ended up 4.3%,
less than 2010’s 5.4%.

The 2011 change in the PPI finished goods index of 4.8% compared to
2010’s 3.8% and was the highest since 2007’s 6.2%.

There was noticeable price weakness at the beginning of the supply
pipeline where prices fell half a point in December, and at the
intermediate level, down 1.1%.

The core rate for raw materials was unchanged in December, after
dropping 2.5% in November and 4.3% in October.

For intermediate core December was the third decline in a row.

“Particularly, export demand from Europe has slowed a little,”
Sager said, “with their economy weakening and the dollar starting to
strengthen again vs. the euro.”

Yet in the raw materials area, iron and steel scrap jumped 6.6%
in December. “You’re not sure there is actually demand for more steel
or it’s just steel companies replenishing inventories while prices are
relatively low,” Sager said.

Food prices dropped 0.3% in December and consumer foods were down
0.8%, the first decline there since May.

Expectations in a Market News International survey centered on an
unchanged result for December for the finished goods index, and a core
rate up 0.1%.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: MAUDS$]