Tuesday, November 18, 2008

Producers Price Index (PPI) - October

Per the BLS:

The Producer Price Index for Finished Goods fell 2.8 percent in October, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decrease followed a 0.4-percent decline in September and a 0.9-percent fall in August. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved down 3.9 percent in October after declining 1.2 percent in September, and the crude goods index dropped 18.6 percent subsequent to a 7.9-percent decrease in the previous month.
Month over Month

Year over Year

Source: BLS


  1. Jake, what is your take on these numbers? I think the headline is somewhat deceptive because it is all due to oil. Core inflation is rising and overall producer inflation is still over 5%.

    While I don't think inflation is a problem because of the economy and asset deflatio, I'd still love to hear your take.

  2. hey ed-

    i think you're right on. the slowing global economy should keep demand for goods and commodities not only in check, but negative. this, along with the inability of the fed and their central bank counter-parts in the developed world to lower rates much more puts the threat of deflation in the limelight. i think they've learned enough about the damage this does to an economy so loaded in debt (existing debt becomes a lot more expensive in a deflationary environment) that they will pull out all the stops necessary to keep this from happening.

    so my thoughts which i hope to write more about in the near future... deflation in the short-term (1-2 years) with inflation coming back thereafter. in other words, the deflation the TIPS market is currently pricing over 5 years looks awfully attractive to me.

    thanks for the post and congrats on the top 25 rank! your blog deserves it.