Friday, April 9, 2010

U.K. Produce Prices Soar in March

The AP reports:

Oil prices rose above $86 a barrel Friday on a weaker dollar and after robust U.S. retail sales in March pointed to growing consumer demand in the world's biggest energy market.

By early afternoon in Europe, benchmark crude for May delivery was up 84 cents to $86.23 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 49 cents to settle at $85.39 on Thursday.

"The oil market is behaving the same way as we have seen during the past several weeks: 'one step back, two steps forward,'" said a report from Commerzbank in Frankfurt. "Supported by benign equity markets, sustained bullish sentiment and a slightly weaker U.S. dollar, the oil price recouped the losses of the previous two days."

This is definitely a sign of a recovery, but at what point does the price of oil become debilitating?

An example... this morning the United Kingdom had its highest producer price index print in two years. Per ecPulse:

PPI input for the month of Mach at 3.6% higher than the revised prior reading of 0.6% from 0.1% while on the year rallied to 10.1% from the revised previous reading of 7.5% from 6.9%.

PPI output for March rallied to 0.9% from 0.3% and on the year climbed further to 5.0% from the revised prior reading of 4.2% from 4.1%.

As can be seen, this jump is almost entirely due to the cost of energy (it has not yet fed into other goods / services) and elevated producer prices will be difficult for businesses to pass through to end consumers.