Capital and intermediate goods both fell over the previous quarter and only consumer goods registered a slight quarterly rise.
Looking at the different stages of production, core prices for intermediate goods slid 0.5% while the core crude measure was flat.
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Core intermediate goods were down 0.6% while core crude goods fell 2.8%.
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Since the import slump means that the region is bringing in fewer raw materials and intermediate goods for manufacturing, it implies a continuing export downturn.
Crude costs rose 3.4% in February while intermediate goods gained 2%.
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Taking the different stages of production into perspective, the PPI showed a substantial acceleration in the price of crude goods accompanied by a tepid increase in the price of intermediate goods.
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But studies by the New York Federal Reserve Bank and others show that most Chinese imports are intermediate goods that are assembled into finished products in China and then sent to foreign markets.
Sceptics argue that China alone cannot ignite economic recovery across the region because a large portion of Asia's exports to China are just intermediate goods, which are processed into exports to developed economies.
China is a prominent export-processing economy, which means that its factories import lots of raw materials and intermediate goods to stoke the machines and processes that manufacture and assemble the finished goods it exports to the United States and elsewhere.
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While Japan suffered the direct impact of a massive tsunami, which also caused a nuclear crisis at the Fukushima Daiichi plant, the U.S. saw production hit by supply chain disruptions, as Japan provides many of the intermediate goods needed to build cars. (Read Bernanke Fed Blames Commodities And Japan For Soft Patch).
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Mr Hatzius suggests that they may be undercounting imports of intermediate inputs of goods and services produced abroad by American firms that have outsourced jobs to cheaper countries.
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As crude costs continue to rise, explains McCain, they will be passed down the production process, from crude to intermediate and to finished goods.
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Moreover, during the three months ending January, the rate of advance in the producer price indices for intermediate products, and finished goods have all accelerated into double digit annual rates of advance.
As resources such as labour and capital are released from intermediate activities into the production of goods, the overall supply of goods will increase and prices will fall.
Gross value added is calculated at the level of branches of the economy as the value of output of goods and services less the value of intermediate consumption.
The recklessness of that action sent shock waves through the boardrooms of every Japanese company that has come to rely upon China not just for raw materials, but for intermediate parts and, of course, for finished goods.
So long as you can count final goods, unmeasured improvements in the supply of intermediate services will succeed in raising measured productivity.
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