Producer Prices: Tame, or Not?

Wednesday, November 14, 2007 | 10:08 AM

0.1%  PPI ?

Not according to the BLS year over year data:

"From October 2006 to October 2007, finished goods prices advanced 6.1 percent.  Over the same period, the index for finished energy goods climbed 16.6 percent, prices for finished consumer foods rose 7.1 percent, and the index for finished goods other than foods and energy increased 2.5 percent.  At the earlier stages of processing, prices received by intermediate goods producers advanced 5.6 percent, while the crude goods index jumped 25.7 percent for the 12 months ended in October."

Perhaps its just me, but I fail to see how that can be considered benign inflation data.

The annual comparison doesn't have any seasonal adjustments; Its merely where prices are today versus 12 months ago.

Finished goods prices +6.1%; Energy goods +16.6%; finished consumer foods +7.1%; finished goods ex-foods and energy +2.5%.

Note the typical headline:

Wholesale Prices Rise Slightly

The producer price index for finished goods rose 0.1% in October, the Labor Department said Tuesday, following September's 1.1% increase. The core index, which excludes food and energy, was unchanged after rising 0.1% in September. Wall Street had expected a 0.2% gain in both the headline and core figures, according to a Dow Jones Newswires survey.

Even the monthly figures are a result of a little sleight of hand:  Peter Boockvar wrotes:

"Implied inflation expectations in the 10 yr TIPS after the reported benign PPI is unchanged with yesterday's close because of the expected reversal upward in gasoline prices in Nov and also the apparent impact that a 2.7% drop in truck prices had on the # as it was the biggest one month drop since Oct '06. Market News is reporting that the unadjusted overall PPI rose .7%, "so most of the 'good behavior' of inflation this month merely stems from seasonal adjustment factors." (emphasis added)

Astounding . . .




Producer Price Indexes - October 2007

Wholesale Prices Register Modest Increase
WSJ, November 14, 2007 9:14 a.m.

Wednesday, November 14, 2007 | 10:08 AM | Permalink | Comments (32) | TrackBack (1) add to | digg digg this! | technorati add to technorati | email email this post



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» PPI Follow Up from The Big Picture
This may be a bit wonky, but follow it thorough to the end. Yesterday, we discussed how you can avoid the usual seasonal adjustments and other shenanigans by using year-over-year prices. Those numbers reveal that inflation is far from benign. Rereading... [Read More]

Tracked on Nov 15, 2007 6:39:02 AM


It is all slight of hand....anyway CPI will likely suffer the same fate; year over year will probably put the inflation rate north of 3.7% as last year's numbers during the next 3 months are very low.....month to month change only has to be "slight" and I am sure it will be but the trend is there for all to see

Posted by: Guy M. Lerner | Nov 14, 2007 10:15:47 AM

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