What Inflation?

From Bloomberg:

Prices paid to U.S. producers rose for a sixth month in June, pushed up by surging fuel costs that underscore risks of inflation.

The 1.8 percent increase was the biggest gain since November and followed a 1.4 percent jump the prior month, the Labor Department said today in Washington. So-called core producer prices that exclude fuel and food increased 0.2 percent, less than economists forecast.

Higher prices for fuel and raw materials cut into corporate profits and pressure them to raise prices. Federal Reserve policy makers, who have paused in their steepest rate cuts in two decades, last month said ``upside risks'' to inflation had increased and they would act ``as needed'' to foster both stable prices and growth.

``It was primarily confined to the energy sector,'' said Lindsey Piegza, an analyst at FTN Financial in New York, which correctly forecast the rise in the core rate. ``There is risk that in the future they could seep through and cause an inflationary spiral, but right now inflation is going to take a back seat to the slowing economy'' on the list of Fed concerns.

See -- if only we the news reports dealt exclusively with core inflation then everything would be OK.

Also note the following:

The Labor Department said producer prices over the last 12 months were up 9.2 percent, the biggest increase since a 10.4 percent gain in June 1981 when the United States was last mired in a low-growth, high-inflation period known as stagflation.

Isn't that just wonderful?

What Inflation?

From the BLS:

The Producer Price Index for Finished Goods rose 1.0 percent in January, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This increase followed a decline of 0.3 percent in December and a 2.6-percent advance in November. At the earlier stages of processing, prices for
intermediate goods moved up 1.4 percent after falling 0.2 percent in the prior month, and the crude goods index increased 2.5 percent following a 1.1-percent advance in December. (See table A.)

And the worst part:

The 12 month percentage change for January 2008 was 7.4%.

What Inflation?

From the BLS:

The Producer Price Index for Finished Goods rose 3.2 percent in November, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This gain followed increases of 0.1 percent in October and 1.1 percent in September. At the earlier stages of processing, prices for intermediate goods moved up 3.7 percent after rising 0.1 percent in the prior month, while the crude goods index increased 8.7 percent following a 2.4-percent advance in October.

.....

Before seasonal adjustment, the Producer Price Index for Finished Goods advanced 1.6 percent in November to 171.3 (1982 = 100). From November 2006 to November 2007, prices for finished goods rose 7.2 percent. Over the same period, the finished energy goods index climbed 23.6 percent, prices for finished consumer foods increased 7.3 percent, and the index for finished goods other than foods and energy moved up 2.0 percent. For the 12 months ended November 2007, prices for intermediate goods increased 8.1 percent, while the crude goods index jumped 22.4 percent.

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in November before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The November level of 210.177 (1982-84=100) was 4.3 percent higher than in November 2006.

.....

During the first eleven months of 2007, the CPI-U rose at a 4.2 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 2.5 percent for all of 2006. The index for energy, which increased 2.9 percent in 2006, advanced at an 18.1 percent SAAR in the first 11 months of 2007. Petroleum-based energy costs increased at a 30.8 percent annual rate and charges for energy services rose at a 3.2 percent annual rate. The food index has increased at a 5.3 percent rate thus far in 2007, following a 2.1 percent rise for all of 2006. Excluding food and energy, the CPI-U advanced at a 2.4 percent SAAR in the first 11 months of 2007 after increasing 2.6 percent in 2006.

The Fed is now in a really terrible bind. The economy is clearly slowing so they want to lower rates. But look at the yearly increase in food and energy costs at both the wholesale and consumer level -- those are big jumps. These charts --

for agricultural prices



and oil



are really starting to hurt. That means the Fed is pretty much hemmed in. If they lower rates further they run the risk of getting seriously behind the inflation ball. But if they don't lower rates, the stand the chance of getting behind the economy ball.

I think these inflation figures are one of the reasons the Fed signed up with all those other central banks. That would allow the Fed to add liquidity without lowering rates and possibly stoking inflation further.

Either way, Bernenake and company have a really terrible policy choice ahead of them.

PPI Up 3.2%

From the BLS:

The Producer Price Index for Finished Goods rose 3.2 percent in November, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This gain followed increases of 0.1 percent in October and 1.1 percent in September. At the earlier stages of processing, prices for intermediate goods moved up 3.7 percent after rising 0.1 percent in the prior month, while the crude goods index increased 8.7 percent following a 2.4-percent advance in October. (See table A.)

This is the biggest increase since 1973.

The big issue was energy (imagine that when oil prices surged to nearly $100/bbl last month) which increased 14.1%. Ex-energy, the increase was .4%. Guess it's time to go back to "core" inflation; it looks so much better.

The Only Thing You Need to Know About PPI

From Econoday -- the yearly percentage change in PPI.



I don't see any inflation -- or any kind of inflationary trend. Do you?