Tuesday, November 16, 2010

How Finished Goods Prices Are Up 4.3% Over Last 12 Months; Gasoline Prices are up 9.8% in October, and the BLS Reports Declining Inflation

The Richard "I Am Not a Crook" Nixon inspired creation, "core inflation" number, that eliminates  food and energy costs from inflation calculations, fell 0.6 percent for the month of October, according to the BLS—the biggest drop since July 2006. The news media is blasting out the number far and wide to anyone who justs reads headlines.

Meanwhile back in the real world, the Producer Price Index for Finished Goods increased 0.4 percent in October, seasonally adjusted. This advance followed a 0.4 percent rise in both September and August. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 1.2 percent in October, and the crude goods index increased 4.3 percent. On an unadjusted basis, prices for finished goods advanced 4.3 percent for the 12 months ended October 2010.

In October, the increase in the index for finished goods can be traced to prices for finished energy goods, which moved up 3.7 percent. Over ninety percent of the October rise in energy prices can be attributed to the index for gasoline, which moved up 9.8 percent.

Looking down the road, a huge spike in food prices is headed down the highway. The index for crude foodstuffs and feedstuffs increased 4.2 percent in October. For the 3 months ended in October, prices for crude foodstuffs and feedstuffs climbed 13.3%.

In a further manipulation, hiding climbing prices, Michael Berger emails me to point out that new car prices dropped 3 percent in October, according to the BLS. It was the biggest decline since July 2006. Prices of light trucks decreased 4.3 percent, the most since October 2006. But get a load of this:

Today's report included the Labor Department's valuation of quality changes in 2011 model vehicles. This means the vehicle declines are totally bogus. Prices didn't go down anywhere except on a statisticians desk at the BLS.

The decline in vehicle prices for October, according to the BLS, was completely a determination by the BLS that new vehicles were outfitted with better equipment or more options, while manufacturers kept price adjustments to a minimum. In other words, vehicle prices didn't decline. In other words, this is the month the BLS does hocus pocus "quality change adjustments".

Take out the cost of food and gasoline, play hocus pocus with auto prices (that really aren't down) and viola, inflation is deflation.


  1. Thank you for teling like it is. What we read and hear in the media is so misleading one does not know economically where the country is heading. They mislead us by telling us what they want us to believe. I am in Canada and watching the US economy to see just how soon we will be seeing the same thing. Looks like we are already on our way.

  2. Remove all the hedonic and quality adjustments and you get 0.1% more CPI per year. Irrelevant, meaningless and indifferent are words that come to mind.

  3. hey gold bugs you cant eat money - ha ha . Do you think god would let the gun and coin show guys come out like noah? I doubt it .

  4. The only reliable statistics on what is happening economically is your own personal buying experience, that you can believe government statistics are manipulated to present the bast possible face to taxpayers and are totally unreliable

    Everybody KNOWS intuitively that prices are rising, or, and this is important, portion sizes are DECREASING while prices remain the same or rise only smaller amounts.

    The simple truth is that as long as the FED keeps printing money then the value of every existing dollar is compromised and the established TREND of progressively losing purchasing power will continue, almost 1/3rd just since 2000, 97% since the FED was established in 1913.

    The definition remains the same (A DOLLAR) while the REALITY is changing constantly to the downside. Its true you can't eat gold or silver, but paper money isn't very palatable or nutritious either, and the time is rapidly coming when you would rather hand over a silver coin for a loaf of bread than a stack of paper currency heading to zero, its real intrinsic value, where all fiat currencies eventually end up.

  5. Those who do not take advantage of the current ultra low prices of gold and silver will look back in anguish and horror when gold hits $5000 and Silver $350, within the next 24 months.

    All gold and silver mined in China and Russia must now be sold to their respective governments at the SPOT prices. Brazil, Mexico and South Africa will follow soon.....quickly followed by every other Country in the world.

    Future WARS, if any, will be fought over GOLD and SILVER, the only real money throughout the world.

  6. 5000....lol keep dreaming