Tuesday, July 15, 2008

PPI Rise Most Since 1981

The Producer Price Index for finished goods in America rose another 1.8% in June, after rising 1.4% in May. As a result, the year over year increase rose to 9.2%, the highest since June 1981.

Meanwhile, the price indexes for intermediate and crude goods rose 14.5% and 45.5% respectively, indicating more inflation in "the pipeline".

This follows Friday's report that import prices are up 20.5% and export prices up 8.6%. Tomorrow's CPI are likely to show much lower rate of increases for three reasons: 1) The CPI is even more adjusted (hedonics etc.) in various ways to lower its increase 2) The CPI consists to a large extent of services whose price increases likely have accelerated less 3) Many retailers are likely reducing their margins to attract customers in today's weak economy. Even so, the CPI will likely also accelerate its increase, and although the rate of increase will likely stay below 5% in June, it will rise above 5% by August at latest and probably as soon as July.


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