I believe that headline price numbers (which include food and energy prices) rather than core price index numbers (which do not) are a better indication of price pressures in the economy. That said, Keynesian economists, such as Paul Krugman, are big fans of the core index. Krugman also, until recent weeks, feared price deflation.
The core producer price index just announced by the Bureau of Labor Statistics came in at plus 0.4%, an annualized rate of 4.8%. So based on Krugman's own favored data point, the numbers show his deflation fear is way off base. Absurd is not too harsh a word.
The headline PPI showed a lower 12-month gain through January of 4.1%, largely because of a decline in January in food and energy. But if you think food and energy are going to stay down, I have a fog making machine in San Francisco that I would like to sell you. Also I have a new Krugman Alert service that you can purchase at $500 a year. Whenever Krugman makes a new comment on the economy, you will be alerted instantly.
Bottom line: The developing price inflation continues to brew. PPI, CPI, core and headline will be well over 5% on an annualized basis in no time. If you are looking for an alternative view, keep an eye on Krugman.
Interesting...tell me more about this fog making machine.
ReplyDeleteVox Day is arguing that, based on his understanding of Austrian Economics, we should expect to enter a "deflationary recession".
Do you know what he is talking about?
What sort of sauce does Krugman use for all of the crow he is forced to eat?
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