Producer Prices Jump 1.2% in July

Inflation at the wholesale level is running at the fastest annual pace since 1981, with a 9.8 percent gain over July 2007.

For July, wholesale energy prices jumped by 3.1 percent following a 6 percent gain in June. That increase reflected big jumps in the price of natural gas, home heating oil and liquefied petroleum gas, which offset a 0.2 percent dip in gasoline costs.

Food prices rose by 0.3 percent in July after a 1.5 percent surge in June. Beef prices jumped by 7.4 percent, the biggest increase in nearly four years. Milk prices shot up by 5 percent, the biggest gain in a year, while soft drink prices rose by 2.4 percent, the largest increase in four years.

PPI Rockets

Over the past 12 months, the producer price index, which tracks inflation at the wholesale level, gained 9.2% -- the largest year-over-year gain since June 1981.

The index for gasoline rose 9% in June.

Prices for fresh and dry vegetables gained 14.7%, while prices for eggs for fresh use rose 11.6%.

Prices for pet food rose a record 6% on the month. The prior record was a gain of 3.5% in July 1988.

Prices of crude goods rose 3.7% in June, as prices of energy materials rose 5.4%. Prices for crude foodstuffs and feedstuffs rose 3.5%.

For all practical purposes, inflation in the United States is now at 10%. The Fed has recently slowed money supply growth, if the slowdown continues (unlikely) it will eventually put a damper on inflation. If the Fed starts the money engines again (likely) 20% inflation down the road is very likely.