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Energy Surging into PPI Future

Since the Great Recession, the Producer Price Index (PPI) has been irrelevant.  Whatever price increases occurred – the supply chain simply absorbed.  Price increases for the most part were not passed on to the consumer.

In the December, 2010 PPI release there is a big slug of increased costs in the pipeline, energy (aka fuel for your car, boat, truck, train – and, for many, fuel oil to heat their house).  Because margins are small in the distribution chain, this cost will end up appearing in the CPI.  The headlines from the press release:

The Producer Price Index for Finished Goods rose 1.1 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed increases of 0.8 percent in November and 0.4 percent in October and marks the sixth straight rise in finished goods prices. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 1.0 percent, and the crude goods index increased 4.0 percent. On an unadjusted basis, prices for finished goods advanced 4.0 percent in 2010 after climbing 4.3 percent in 2009.

Three-quarters of the increase in the finished goods for the PPI are from energy.  The PPI YoY increases have been in the 4% range for 2010.

The big price change this month in finished goods (other than energy) within the finished goods of the PPI were vegetables and fruits (up 15% to 23%) and eggs (down 16%).

Related Articles

CPI Surge Caused by Rising Energy prices  by Steven Hansen

Producer Price Increase Typical for New Normal  by Steven Hansen

Consumer Price Index Continues to Show Little Price Inflation  by Steven Hansen

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  1. [...] Producers Price Index was slightly effected by the rise in energy prices (analysis here) causing the finished goods prices to rise from 0.8% to 1.1%.  The Consumer Price Index (CPI) had [...]

  2. [...] energy rise – causing massive distortion in the Producer Price Index (PPI) for December 2011 (analysis here).   We awaited its impact to the entire distribution chain down to the consumers.  Now the [...]

  3. [...] Energy Surging into PPI Future by Steven Hansen [...]