Wednesday, August 17, 2011

Producer Price Index Climbs by 7.2% Over Last 12 Months

In July, even the inflation-deniers "core" price index for finished goods, which does not include foods and energy, let them down. The core index rose 0.4 percent, for an annualized rate of 4.8%.

But the index for finished consumer foods, which is not part of the core index, alone increased by 0.6 percent in July, an annualized gain of 7.2%, which matches the actual increase inthe overall producer price index gain over the last 12 months.

According to the BLS, a major contributor to the July food increase was beef and veal prices,
which moved up 2.7 percent for the month. Higher prices for fresh fruits and melons also played a significant role in the finished foods advance.

Bottom line, the food index is trending in line with the overall producer price index at 7.2%. At the start of the year, I forecast that double digit price inflation would hit somewhere in the second half of the year. The second half has just started and only a short-term dip in energy prices (down 0.6% in July) prevented that from coming very close to occurring in July, but we are very near. Money supply is currently growing very rapidly under Fed chief Ben Bernanke and the likelihood that we will  hit double digit price inflation by the end of the year remains very strong.

Here are the 12-month changes in producer prices since the start of 2011:

Jan    3.6

Feb   5.4

Mar   5.6

Apr   6.8

May  7.3

Jun    7.0

Jly    7.2

Only Paul "Prepare for Deflation" Krugman would not be able to see the accelerating price inflation. Given the accelerating money growth this price inflation trend is going to do nothing but accelerate.


  1. But there is no inflation because there is no opportunity cost to creating money. This must be from other reasons, probably speculators and Ron Paul.

    - Krugman

  2. It's the teabagger terrorists and people who own private jets who are driving up prices.


  3. It is not inflation it is just prices going up.

    -Joey Biden

  4. If I were president I would redistribute inflation fairly so that Amerika's poor can have their fair share.

    -Matt Damon

  5. Inflation? What inflation? I don't know what you are talking about. I am not even going to acknowledge it.

    -Candy Crowley

  6. Just like Ron Paul, Inflation does not exist.


  7. There is no inflation. I checked with TurboTax.

    -Tim Geithner

  8. There is good inflation because only prices are going up, creating liquidity and jobs. It would only be bad inflation if wages rise too, which would slow growth.

    - Counter-logical Obfuscating Sophistry

  9. Socialism is the cure for inflation...It will kill you.

    -JM Keynes

  10. we need a rallying cry, it's time to start the revolution!!

  11. Data from the Census Bureau on share of aggregate income by quintile seems to indicate that the share of national income of the rich tends to be inversely correlated with inflation. It's true that inflation is bad - for the rich. For the rest, not so much. Cui bono