Producer Price Index February2009

Anika R. Khan, Economist

[email protected] ● 704-715-0575 March 17, 2009

PPI Rose in February Driven by Increase in Gasoline Prices The Producer Price Index (PPI) rose 0.1 percent in February driven by an 8.7 percent increase in gasoline prices. Core PPI, which excludes food and energy prices, rose 0.2 percent. Food prices declined 1.6 percent, the biggest decline in three years. Core intermediate goods prices fell 0.6 percent, suggesting pipeline pressures should remain subdued. Headline PPI Driven by Energy Prices

Core Intermediate and Raw Materials Suggest Slowing

• The PPI for total finished goods rose 0.1 percent in February driven by an increase in gasoline prices, which rose 8.7 percent, the second consecutive monthly increase. The bounce back in energy prices is not surprising given how sharply they declined last fall. Consumer goods prices rose 0.1 percent in February with women’s apparel, tobacco and household appliances all showing increases.

• Core PPI rose 0.2 percent on the month, but the 0.6 percent decline in core intermediate goods prices suggests declines in the pipeline. Core intermediate goods prices have historically shown the strongest relationship to core CPI and suggest moderation in consumer prices in coming months. Core raw materials prices were down 29.5 percent year over year, and also point to moderation in wholesale prices in the long-term.

Producer Price Index

Core Producer Price Index

Total Finished Goods

20%

20%

10%

10%

0%

0%

-10%

-10%

-20%

-20% PPI 3 Month Annual Rate: Feb @ -3.7%

-30%

-30% 87

89

91

93

95

97

99

01

03

05

07

20%

15%

15%

10%

10%

5%

5%

0%

0%

-5%

-5%

-10%

-10%

-15%

-15%

-20%

-20% PPI 3 Month Annual Rate: Feb @ -17.0% PPI "Core" Intermediate Goods Yr/Yr Percent Change: Feb @ -0.1%

-30% 87

89

Core Producer Price Index 8%

PPI 3 Month Annual Rate: Feb @ 3.6% PPI "Core" Finished Goods Yr/Yr Percent Change: Feb @ 4.0%

6%

91

93

95

97

99

01

03

05

07

09

Core Producer Price Index

Finished Goods Less Food & Energy

8%

-25%

-30% 85

09

25%

20%

-25%

PPI Finished Goods Yr/Yr Percent Change: Feb @ -1.3% 85

Intermediate Goods Less Food & Energy

25%

6%

4%

4%

2%

2%

0%

0%

-2%

-2%

-4%

-4%

-6%

-6%

Crude Materials Less Food & Energy

100%

100%

80%

80%

60%

60%

40%

40%

20%

20%

0%

0%

-20%

-20%

-40%

-40%

-60%

85

87

89

91

93

95

97

99

01

03

05

07

09

-60% PPI 3 Month Annual Rate: Feb @ -60.5%

-80%

-80%

PPI Yr/Yr Percent Change: Feb @ -29.4%

-100%

-100% 85

87

89

91

93

95

97

99

01

03

05

07

09

Wachovia Economics Group publications are published by Wachovia Capital Markets, LLC (“WCM”). WCM is a US broker-dealer registered with the US Securities and Exchange Commission and a member of the New York Stock Exchange, the Financial Industry Regulatory Authority, and the Securities Investor Protection Corp. This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments named or described in this report. Interested parties are advised to contact the entity with which they deal, or the entity that provided this report to them, if they desire further information. The information in this report has been obtained or derived from sources believed by Wachovia Capital Markets, LLC, to be reliable, but Wachovia Capital Markets, LLC, does not represent that this information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of Wachovia Capital Markets, LLC, at this time, and are subject to change without notice. © 2009 Wachovia Capital Markets, LLC.