US wholesale prices for chemicals rise 4.3% in Nov

15 December 2009 14:51  [Source: ICIS news]

Wholesale chem prices dropWASHINGTON (ICIS news)--US wholesale prices for organic chemicals jumped by 4.3% in November, the Labor Department said on Tuesday, part of an overall 1.8% increase in producer prices that included sharp advances in fuel costs.

However, the prices paid for plastic resins and materials at the producer level - also known as wholesale prices - were not part of the general increase, falling by 0.5% in November.

Overall, the department said that its closely watched producer price index (PPI) for November shot up by 1.8%, following a much narrower gain of 0.3% in October.

The sharp gain in the November PPI might rattle Wall Street and investors who worry that the advance could give the US central bank, the Federal Reserve Board, enough justification to begin raising interest rates to head off inflation.

The Fed’s rate-setting committee begins a two-day meeting on Tuesday and will announce its interest rate decision on Wednesday.

But the Labor Department noted that nearly all of the sharp gain in November’s wholesale prices for finished goods was due to significant increases in fuels prices.

“About three-fourths of the November advance in the finished goods index can be traced to higher prices for energy goods, which jumped 6.9%,” the department’s Bureau of Labor Statistics said in its monthly pricing report.

In addition, within the general fuels category, wholesale prices for gasoline were a major contributor, climbing by 14.2% during November.  Increased winter-related demand for home heating oil also was a major factor in the fuels prices advance, the bureau said.

Economists typicall focus on the so-called core prices, those paid at the wholesale level for finished goods other than fuels and food because those two categories often see wide swings in month-to-month pricing that can skew the overall producer price index.

The department said that wholesale prices for finished goods other than fuels and food rose by a more modest 0.5% in November.

However, that gain is noteworthy because it is the largest increase in the core producer prices since October 2008.

In organic chemicals, the 4.3% gain in wholesale prices in November followed a 2.4% decline in October and a 4.9% jump in September.

The 0.5% decline in producer prices for plastic resins and materials during November followed a 1.7% fall in October and a 2.1% advance in September.

($1 = €0.68)

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