PPI runs hot
Sept PPI rose .8% m/o/m, 4 times more than expected led by a 2.3% rise in energy (gasoline prices up 4.2% after 3 mo’s of declines) and .6% gain in food prices. The y/o/y gain is now 6.9% and inflation in the pipeline remains robust. Intermediate goods prices rose 10.5% y/o/y (.6% m/o/m) and 20.9% (2.8% m/o/m) at the crude stage of production. Ex food and energy, prices rose .2% m/o/m, .1% above expectations and are now up 2.5% y/o/y, matching the highest since July ’09. While certainly worth noting today, the market’s attention on inflation will be more focused on tomorrow’s CPI report. With this said, inflation readings I believe are worrisome as its taken hold in an economic environment that is best described as lackluster. And, make no mistake, inflation is a tax and when the wages of the average worker are not rising by the same extent, and in many cases dropping, the standard of living of the average person is falling. The Fed hates deflation (why is the falling price of an IPAD bad I ask them) and they are unfortunately getting what they want, to help the over indebted at the expense of others.
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October 18th, 2011 at 11:51 am
I’m gonna go out on a limb here and say that helping the over indebted would be a GOOD thing for the others. Even if a little inflation is the price we pay.
October 18th, 2011 at 12:07 pm
Gasoline prices are up? I don’t see it in the data (GASREGW on FRED shows Sep starting at July levels, but ending at the lowest level since early March–and dropping in October; the monthly number shows Sep at the same level as Aug–again, the lowest since March) or at the pump.
October 18th, 2011 at 1:32 pm
klhoughton: Your data is probably just older. As in, 15 minutes old. Seriously, crude is rocketing back up again after falling to probably a more accurate $70/bbl as recently as August. The ups and downs are skewing data to show no real change at times, even though the effective prices are all over the place, mainly, up.
It’s the effect on main street that cannot be overlooked. Gasoline is still quite high from 1 year ago, even if it’s a long way from the record highs, non inflation adjusted, 3 years ago. American consumers, world consumers of crude, cannot be expected to absorb these oil shocks that are driven not by war or demand, but rather, by speculation.
October 18th, 2011 at 3:14 pm
I’m going to agree with JonBonnano here. You know every year my grandfather at the holidays would say “this is my last holiday”. He did that for 20 years before he was finally right. I feel the same thing with these people making inflation calls. So far, nada to speak of. There is no out of control inflation anywhere on the horizon. Look at the data. No “invisible bond vigilantes” either.
When will people just admit they’re wrong and shut up?
October 18th, 2011 at 4:49 pm
With PPI surprising to the upside, it will be interesting to see how much pass-through we will see in the CPI in the coming months. If companies are able to pass along higher costs to the consumers, they will be able to maintain their margins but may put a damper on consumer spending which is already slowing down. If companies are not able to pass along higher costs, profit margins (that are already historically high) and earnings will be hit putting a damper on capex and hiring. Damned if you, damned if you don’t for the US economy?
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