Tuesday, May 18, 2010

Hints of High Volatility and Price Inflation in the PPI

The Bureau of Labor Statistics reported the PPI down 0.1% in April, largely the result of lower energy prices.

However, a peek further down the stat sheet suggests brewing price inflation.

Both the intermediate core prices and the overall intermediate numbers were up big in April 1.1% and 0.8% respectively.

The increases were remarkable in some cases, plastic resin costs were up 11.4% in for the month, steel mill products 5.2%, organic chemicals 2.4%, non-ferrous metals 8.4% and lumber 4.5%. This indicates significant volatility under the surface, equal to or greater than the volatility we are seeing on the surface, in say, the stock market. Buckle your seat belt.

On an annualized basis intermediate goods are up in price4.6% this year versus just 2.1% at this same time last year.

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