Chart of the Week: Soaring Producer Prices

The Producer Price Index (PPI) for finished goods jumped up at an annualized rate of 9.8 percent in September, after a flat reading in August. The 12-month growth rate in the PPI rose from 6.5 percent to 7.0 percent during the month.

The PPI for finished consumer foods increased 6.9 percent in September after a 13.8 percent increase in August and is now up 8.1 percent on a year-over-year basis.

Clearly, the pressure on prices at the producer level (read capital goods) is very strong. Because newly printed money flows to the capital goods sector first, it should not come as a surprise that price inflation at the producer level is experiencing the strongest price inflation. This will eventually work its way to the consumer level, as money moves from the capital goods sector to the broad-based labor market. Double-digit PPI numbers are not far away.