Great! The Producer Price Index (PPI) in June 2011 declined month-over-month 0.4%, and year-over-year moderated from 7.3% to 7.0%. On the surface, the headlines tell the story, but below the headlines the upward pressure on prices do not appear to have moderated.
The understory is that it was caused by moderating oil prices. I sit this morning in front of my monitors watching crude prices again approaching the highs before the intervention of the IEA / US Government to try to moderate the oil price increases (analysis here).
The arrows in the above chart tell you this decline is all about oil prices. But if you look at foods, and all items but food and energy – the increases continue. The fall in the PPI is simply a lull in the storm.
Econintersect has shown how the pricing changes moves from the PPI to the Consumer Price Index (CPI). This YoY change implies that the CPI – which will be released later this week, should come in a little over 3% YoY. Last month the CPI YoY change was 3.6% (analysis here) – and Econintersect also predicted a little over 3% YoY growth.
Export / Import Price Growth Moderates in June 2011 by Steven Hansen
CPI: Consumer Price Increases Rise to 3.6% in May 2011 by Doug Short & Steven Hansen
Two Measures of Inflation: Prices and Expenditures by Doug Short
Inflation: Short- and Long-term View by Doug Short, Steven Hansen and John Lounsbury
Beware: Core CPI Follows Food Inflation by Steven Hansen