A tale of two PPI inflation stories.

Posted by Tim Hope on 8/22/08 10:10 am

Each month the U.S. Bureau of Labor Statistics publishes the Producer Price Index (PPI) which is an index measuring changes in wholesale prices.  Despite the fact that food and energy prices have increased significantly over the last few months, they are routinely excluded in official inflation figures so as to arrive at a “core” rate.  While the current “core” rate is a relatively modest 3.5%, it is at a 17 year high.  In addition, it is also 75% higher than the high end of the Fed’s 1-2% target rate.  Looking at the PPI as a whole, the index is at a 27 year high of 9.8%.  Since some use the PPI as a precursor to movements in the Consumer Price Index (CPI), such developments may have a significant impact on the behavior of consumers and wage earners.

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