Thursday, February 18, 2010

Producer Prices Jump from a Year Ago

Marketwatch reports:

U.S. wholesale prices rose a seasonally adjusted 1.4% in January on double-digit increases in gasoline and home heating oil, the Labor Department estimated Thursday. Core prices of finished goods - which exclude food and energy goods - rose 0.3% in January, led by higher prices for light trucks and other capital goods.

The 1.4% increase in the producer price index was higher than the 0.9% gain expected by economists surveyed by MarketWatch. The core rate of 0.3% was also higher than the 0.1% gain expected. The producer price index is up 4.6% in the past year, the largest year-over-year gain since the financial crisis began in late 2008. The core PPI is up 1% in the past year.

Even higher than that 4.6% core rate is the 6.4% year over year increase in finished consumer goods (driven by nondurable goods less foods [i.e. gasoline]). My view is this still largely a reflection off of extreme lows seen a year ago, but the question is will shrinking excess capacity on the margin and overall capacity was taken out of the system drive further increases? My guess is no, but this will be interesting to watch in the coming months.

Year over Year

Month over Month

Source: BLS

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