Tuesday, October 20, 2009

Producer Prices Surprise to the Downside

NY Times details:

Even as investors were bidding up the prices of commodities like oil and gold last month, wholesale prices in the United States were falling, reflecting weak demand at home.

The government’s Producer Price Index fell 0.6 percent in September after rising by 1.7 percent a month earlier, the Labor Department reported on Tuesday. The figures show that, despite a weakening dollar, inflation remains a remote concern as the American economy struggles to pull itself out of a deep recession.

“The demand for goods is still very soft; the United States economy is just barely recovering,” said Allen Sinai, president of Decision Economics. “In a weak economy where consumer spending is weak, businesses have been slashing left and right. This surprisingly deflationary result reflects that.”

Food and energy prices fell for the month, and prices were sharply lower than last year, when the financial crisis deflated a commodities bubble that had lifted gasoline prices to $4 a gallon and sent the dollar to record lows. In September, producer prices were down 4.8 percent from a year ago, and prices paid by consumers were 1.3 percent lower.

That said, expect the producer price index to level off over the next few months. As an example... if over the next three months the index is flat, the year over year change will bounce back to positive territory due to the comparison to the "cliff diven" months from Q4 of last year.

Source: BLS

1 comment:

  1. I heard business is very slow in October for a number of small businesses in the states. Dont be suprised if the PPI continues to decline for October.