Producer Price Index August 2010 Shows Continued Price Soft Spot

Producer Price Index (PPI) for August 2010 continued its 2010 anti-inflation tendency. The PPI is not a good leading indicator for consumer prices as historically only a portion of price increases actually leak through to the consumer. The headlines for the release:

The Producer Price Index for Finished Goods increased 0.4 percent in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed a 0.2-percent advance in July and a 0.5-percent decline in June. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.3 percent in August, and the crude goods index climbed 2.3 percent. On an unadjusted basis, prices for finished goods increased 3.1 percent for the 12 months ended August 2010, their tenth straight year-over-year rise.

My position is that this index has little impact to Joe Sixpack as much of the increases have been adsorbed in wholesale and retail levels . But it is interesting that we are in a relative flat spot.

Twenty years from today, a new group of economists will be graphing this explaining what we are missing in interpreting this chart.

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