What Inflation?

From the BLS:

The Producer Price Index for Finished Goods rose 0.3 percent in February, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This increase followed a 1.0-percent advance in January and a 0.3-percent decline in December. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.8 percent in February subsequent to a 1.4-percent advance in January, and the crude goods index rose 3.7 percent after climbing 2.5 percent in the prior month.

Before seasonal adjustment, the Producer Price Index for Finished Goods increased 0.2 percent in February to 172.2 (1982 = 100). From February 2007 to February 2008, finished goods prices advanced 6.4 percent. Over the same period, the index for finished energy goods increased 19.6 percent, prices for finished consumer foods rose 6.0 percent, and the index for finished goods other than foods and energy climbed 2.4 percent. For the 12 months ended February 2008, prices received by intermediate goods producers increased 8.8 percent, and the crude goods index surged 24.6 percent.

From Marketwatch:

"After two consecutive months of such strong gains in the core PPI, it is difficult to downplay inflation risks," wrote Stephen Gallagher of Societe Generale in an email Tuesday.

"Clearly, manufacturers are pressured by higher material and currency-related costs and are trying to pass these cost hikes onto consumers," Gallagher wrote.

"This report shows broad based core inflation pressures and, despite the decline in food prices in February, the trends in the inflation rate over the last three months point to continued acceleration in prices in this area," wrote Bear Stearns economists.

Next months figures stand a good possibility of being worse because they will include oil's price spike from early March, along with the price spike is several important commodities like Wheat.

Bonds sold-off on the news, but have since moved back. At some point, the inflation news will start to sink-in with bond investors (of course, maybe the bond market is still thinking the economy will eventually hit a deflationary patch)