Producer Price Inflation Moderates (temporarily) in June 2011

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.

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