April 14, 2011
Today's release of the Producer Price Index (PPI) for March reinforces the pattern of higher inflation. The year-over-year core producer price increase was the largest since August 2009:
The Producer Price Index for finished goods rose 0.7 percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed a 1.6-percent increase in February and a 0.8-percent gain in January. At the earlier stages of processing, prices received by manufacturers of intermediate goods climbed 1.5 percent in March and the crude goods index declined 0.5 percent. On an unadjusted basis, prices for finished goods moved up 5.8 percent for the 12 months ended March 2011, the largest year-over-year gain since a 5.9-percent advance in March 2010. More...
Here is an overlay of the Headline and Core (ex food and energy) PPI for finished goods since 2000. As we can see, Core PPI declined significantly during 2009 but has been rising modestly since the late spring of last year.
As the next chart shows, Core PPI is more volatile than Core CPI. For example, during the last recession producers were unable to pass cost increases to the consumer. Likewise in 2010 the Core PPI generally rose while Core CPI generally fell. But in recent months that pattern has begun to change.
Tomorrow's CPI will be very closely watched. Will we see additional evidence that the much publicized evidence of worldwide inflation is coming home to roost in the U.S. household budget?