Since the Great Recession, the Producer Price Index (PPI) has been irrelevant. Whatever price increases occurred – the supply chain simply absorbed. With surging energy prices that is about to change.
Consumer inflation remains very low. CPI continues to grow by a small fraction of the rate for PPI. This can only continue for a limited length of time.
CPI continues to reflect low consumer price inflation. That is consistent with a slow growth environment, but a weakening dollar implies upward pressure on CPI. The CPI data could be a result of a weakening dollar rather than growth.
This weeks economic data continued to find the seasonal adjustment factors are not working properly. In most cases, if you compare the current data to pre-Great Recession data – one conclusion can be drawn. While if you compare the data to New Normal, another conclusion can be drawn. Industrial Production data was particularly effected.
The real story is the very low consumer price increases YoY in August 2010 – and that the seasonal adjustment factors are not working. There is hardly any seasonality in the data, and that the governments seasonal adjustments are over adjusting the data.