PPI Shows Modest Growth

The Producer Price Index for September 2010 rose. The headline reads:

The Producer Price Index for Finished Goods increased 0.4 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed a 0.4-percent rise in August and a 0.2-percent increase in July. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.5 percent in September, and the crude goods index fell 0.5 percent.

On an unadjusted basis, prices for finished goods advanced 4.0 percent for the 12 months ended September 2010, their eleventh straight year-over-year rise. (See table A.)

The problem with the PPI is that it normally does not translate directly into consumer price changes. The big news this month is the change in food prices – but anyone going to the market has seen this change manifesting into consumer food prices also.

In manufacturing, there are intermediate production (such as components) and crude goods with go into intermediate and final production. The rate of increase has been falling in intermediate goods, while the rolling averages for crude goods has been increasing.

The bottom line is that the changes we are seeing in the PPI will have little impact on the economy. The CPI data coming out later this week has a more direct impact.

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