PPI surges higher in June

The Bureau of Labor Statistics released the Producer Price Index for Finished Goods (PPI) today. Seasonally adjusted, PPI increased by 1.79% in June 2008 compared to May. PPI was 9.06% higher than a year ago, which is the highest PPI has been since 1981. The median analyst expectation for month over month PPI was 1.4%. Core PPI (PPI less food and energy) was up 0.24% compared to May and was 3.09% higher than a year ago. This is the highest core PPI has been since 1991. The median analyst expectation for month over month core PPI was 0.3%. Inflation pressures continue to rise even as the economy is weakening.

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Inflation spikes up in the core PPI numbers

The Bureau of Labor Statistics released the Producer Price Index for Finished Goods (PPI) today. Seasonally adjusted, PPI increased by 0.17% in April 2008 compared to March and was 6.40% higher than a year ago. Core PPI (PPI less food and energy) was up 0.30% compared to March and was 3.04% higher than a year ago. This is the highest core PPI has been since 1991.

Part of the reason for the drop in PPI and the rise in the core PPI was the seasonal adjustments. The Non-seasonally adjusted PPI was up 0.74% compared to March 2008 and up 6.51% compared to a year ago. The Non-seasonally adjusted core PPI was up 0.30% compared to March 2008 and up 3.04% compared to a year ago.

Inflation is at an interesting crossroads. Will inflation creep into the core numbers excluding the increases in food and energy? Or will the slowing economy dampen inflation as it typically does during recessions. The wild card is the global economy. In the past, the world was dependent on America and the world would catch a cold if the U.S. sneezed. Now the roles are reversing; we are watching China and OPEC to see what will happen to prices.

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PPI for March Surges Ahead

The Producer Price Index for Finished Goods (PPI) seasonally adjusted increased by 1.09% in March compared to the previous month and 6.93% compared to last year. Core PPI (less food and energy) increased by 0.24% compared to February 2008 and 2.80% compared to March 2007.



April looks rough already. Crude oil and Gasoline futures reached record highs today. In the past twelve months, sugar prices are up 27%,Corn prices have surged 67% and wheat prices have shot up 73%. Inflation is still raising its ugly head in the face of a recession when inflation pressures usually fall with the slowing economy.

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PPI for February remains high

The Bureau of Labor Statistics released the PPI numbers today. PPI took a back seat to Lehman and Goldman’s earnings, the rate cuts, and the resurgent stock market.



PPI rose 0.35% (4.15% annualized) over last month and 6.75% year over year. Core PPI rose 0.55% (6.59% annualized) over last month and 2.49% year over year. PPI has paused around the 7% range. Core PPI has surged in the last two months. It will be important to see what happens with inflation if we are entering in a recession. Often a slowdown will lead to a drop in inflation. However, this time around international pressures like the surging inflation in China and the hot commodity prices may keep the pressure on.

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PPI surges higher; Stagflation whispers are getting louder

Stagflation whispers are starting to be heard. Per Google Trends, news references to stagflation reached a 3 year high this week. Google searches this week for stagflation were topped only when Greenspan warned that stagflation was a possibility in December 2007.

Stagflation refers to a stagnant economy and inflation coinciding. Typically as the economy heats up, inflation will start to pick up. The Fed can then raise rates to slow the economy down and inflation with it. Or vice versa, lowering rates would stimulate the economy at the risk of inflation. Currently we have the economy starting to slow down with inflation appearing to pick up steam.

The Bureau of Labor Statistics reported the Producer Price Index (PPI) this Tuesday. PPI is a measure of the average price level for capital and consumer goods received by producers. This measures price changes before they are passed on to consumers.


The PPI for Finished Goods rose 0.99% in January 2008 over December 2007. PPI rose 7.71% January 2008 compared to January 2007. Core PPI (excluding food and energy), rose 0.43% month over month and 2.37% year over year. PPI is much more volatile than CPI. It also leads CPI. Price increase are not immediately passed on to consumers. However CPI does seem to follow the patterns formed by a 24 month average of the core PPI. Increases in PPI will eventually turn into increases in CPI; the same with decreases.

Most of the recent surge coming from increases in food and energy. However, if there isn’t a quick reversal, it looks like core PPI and core CPI will be heading up as well.

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