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Wholesale Prices Surge 1.9%, most since 1974

Posted By Barry Ritholtz On October 18, 2005 @ 9:42 am In Inflation | Comments Disabled

Wsj_ppi10182005091359Producer Prices in September soared "by the largest amount in more than 15 years." While the Sunshine squad blamed "hurricane-spurred surge in energy prices" the so-called core inflation pressures also appeared to gain momentum.

The 4.2% year over year difference in price increases between Finished Goods (+6.7%) and Core Finished Goods (+2.5%) was the biggest in 30 years.  Raw-materials up 10.2% in September (versus 2.3% in August).

Can you say margin squeeze and/or earnings hit?

The BLS reported that PPI for finished goods increased 6.9% over the past 12
months . . . the fastest rise in prices in 15 years. This was almost double the rate in June. 

Further, the [1]WSJ [1] reported "the uptick in inflation wasn’t confined to the typically volatile food and energy sectors, however: excluding those costs, inflation posted a worrisome increase of 0.3% after showing no increase at all in August."

Hey, you mean stuff besides food and energy is going up in price? Gee, except for housing, industrial metals, insurance, medical care, wood, paper, precious metals, and education, very little is rising in price. Note that rotary phone prices held firm; Other than that, all bets were off.

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click for larger chart

Ppi_yoy_october_05 [2]

Chart courtesy of Briefing.com [3]

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UPDATE October 19, 2005 12:23 PM

Today’s NYT:

Producers Are Absorbing Higher Fuel Costs, for Now [4]
http://www.nytimes.com/2005/10/19/business/19econ.html

"Thus far, businesses have not passed along the entire increase in their costs
to consumers. Economists have struggled to explain fully why that may be
happening and how much longer it can continue.

Technology and other cost-saving measures have allowed businesses to become
more efficient in the last decade, but those productivity gains have slowed
recently. Some companies might not be able to charge more because of
competition, even though the price of gasoline was up 12.7 percent and
commercial natural gas was up 10.4 percent."

Oh, and tired consumers unable to pay up might also help explain this . . .

 

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Sources:
Wholesale Prices Surge 1.9%; Core Price Index Rises 0.3% [1]
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
October 18, 2005 9:16 a.m.
http://online.wsj.com/article/SB112963771212071802.html

PPI surges 1.9%, most since 1974 [5]
By Rex Nutting, MarketWatch
Last Update: 9:08 AM ET Oct. 18, 2005   
http://www.marketwatch.com/news/story.asp?guid=%
7B3FD81095-93C4-40EE-9A20-A41888A0E4F8%7D&siteid=google


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/10/wholesale-prices-surge-19-most-since-1974/

URLs in this post:

[1] the : http://online.wsj.com/article/SB112963771212071802.html

[2] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/ppi_yoy_october_05.gif

[3] Briefing.com: http://www.briefing.com/Platinum/Calendars/EconomicReleases/ppi.htm

[4] Producers Are Absorbing Higher Fuel Costs, for Now : http://www.nytimes.com/2005/10/19/business/19econ.html?ex=1287374400&en=a9ea94173f053a87&ei=5090&partner=rssuserland&emc=rss

[5] PPI surges 1.9%, most since 1974: http://www.marketwatch.com/news/story.asp?guid=%7B3FD81095-93C4-40EE-9A20-A41888A0E4F8%7D&siteid=google

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