Economy Watch: Wholesale Prices, Consumer Sentiment, Energy Sector Wages Peak

The Producer Price Index for finished goods rose in September solely due to food and energy prices. The consumer sentiment index for October is also up, to the highest rate since September 2007. Energy sector wages rose the most in the third quarter.

The Bureau of Labor Statistics reported on Friday that the Producer Price Index for finished goods rose 1.1 percent in September. At the earlier stages of processing, prices received by manufacturers of intermediate goods rose 1.5 percent in September, and the crude goods index advanced 2.8 percent.

The uptick in September was driven entirely by food and energy prices — especially energy. Prices for finished goods except for food and energy were unchanged in September after rising 0.2 percent a month earlier.

Prices for finished energy goods advanced 4.7 percent in September after rising 6.4 percent in August, according to the BLS. A 9.8 percent jump in the gasoline index accounted for more than 80 percent of the September increase. Advances in the indexes for diesel fuel and residential natural gas also contributed to the rise.

Energy Sector Wages Advance Most 

It isn’t clear yet whether the wholesale energy price increases reported by the BLS will affect consumer prices at the pump in the immediate future. According to the AAA Daily Fuel Gauge Report, gas prices have been slipping lately in most of the country, with California as a notable exception. On Sunday, the national average for a gallon of regular was $3.794, compared with a month earlier, when it was $3.871.

The boom in energy is having an impact on industry wages as well as wholesale and retail prices. The company PayScale, which tracks wages in various industries, said in its third quarter report last week that wages in the oil, gas and mining industries rose 4.9 percent during the third quarter of 2012, compared with the same quarter in 2011. That was the largest increase among any industry category that the company tracks, beating the likes of utilities (up 4.4 percent year-over-year) and real estate and rental services (up 3.7 percent year-over-year).

It’s also no coincidence that metro Houston, with its heavy concentration of energy businesses, saw the largest annual average wage increase among the 20 cities tracked by PayScale, up 3.9 percent. But energy isn’t the only driver of wage expansion in various metro areas, according to the company. Seattle, San Francisco and Boston, three metros known for their strong tech presence, each experienced annual wage growth of more than 3 percent. In fact, San Francisco had its strongest quarterly wage growth (3.6 percent) since first being measured by the PayScale Index in 2006.

Consumer Sentiment Unexpectedly Up 

The preliminary Reuters/University of Michigan consumer sentiment index registered at 83.1 for October, up from 78.3 in September. Though still fairly low, that was the highest rate since September 2007, before the pre-recessionary sense of doom about the economy really caught on.

The expectations component of the index was up to 79.5 from 73.5, well above expectations. The survey’s gauge of current economic conditions was also above economists’ forecasts, rising to 88.6 from 85.7.

Wall Street was mostly down on Friday, except for the Dow Jones Industrial Average, which gained a negligible 2.46 points, or 0.02 percent. The S&P 500 and the Nasdaq were down 0.3 percent and 0.17 percent, respectively.