· Producer prices continued strongly higher in July, with the total index up 1.2% after June’s outsized 1.8%, and the core up a substantial 0.7%, considerably more than June’s 0.2%. Forecasts for the total index centered around 0.6% and for the core, 0.2%. Intermediate goods rose 2.7%, with their core up 2.0% and crude goods were up 4.2%, with the core up 3.4%. All of these are monthly changes; year-on-year, finished goods prices are up 9.8% and crude goods a whopping 51.3%.
· What we know, though, before we panic over these inflationary figures, is that the PPI data are collected near mid-month, specifically the Tuesday of the week containing the 13th of the month. For July, that day would be Tuesday, July 15, now five weeks ago. That period was near the peak in commodity prices; by yesterday, futures prices, measured by the Reuters/Jeffries CRB Futures Index had fallen 14.6% since that date, and the CRB Spot Index was down 5.5%. So while the previous gains in commodity prices continue through the production and distribution system, we do know that some relief might already be in process.
· Meantime, the bigger-than-expected gain in the July finished goods index did hit a wide variety of items. Food was a notable exception, inching up only 0.3% from June. But energy rose 3.1%, concentrated in residential gas (8.8%) and heating oil (3.7%); before seasonal adjustment, gasoline was up 2.8%, but that was all seasonal (believe it or not!), so that with adjustment, it was actually down 0.2% (sure.) Among consumer goods with better-than-1% monthly increases are soaps & detergents, tires & tubes, newspapers, floor coverings, sporting goods and fine jewelry. Capital equipment overall saw an 0.8% rise, seasonally adjusted. Among the larger advances there are machine tools, materials handling equipment, pumps, transformers, heavy trucks and ships. Passenger car wholesale prices rose 0.5% in July and light trucks 0.8%, both seasonally adjusted. Several of these show the effects of earlier increases in lumber, petroleum and metals and we can hope that renewed declines in those raw materials can help alleviate further price pain.
