Wholesale prices jump (PPI higher than expected)

[ender]

well, after two months of delays, PPI was finally released, and it aint pretty.
---
http://money.cnn.com/2004/03/18/news/economy/ppi/index.htm
---
NEW YORK (CNN/Money) - U.S. wholesale prices surged in January, the government said Thursday, exceeding Wall Street forecasts.

The Labor Department said its producer price index (PPI), a measure of wholesale prices, rose 0.6 percent after rising a revised 0.2 percent in December. The so-called core PPI, which excludes often volatile food and energy prices, rose 0.3 percent after falling 0.1 percent in December.
---

not good - PPI outpacing CPI is very very bad.

[jmcgowanjm]

1. And that the BLS hid it for 2 months, badder still

see urbansurvival.com for good analysis
of the hiding of PPI.

[Don Claybrook]

2. Can you help to explain this?

Economics for me is pretty much comprised of finding change in the sofa and checking to see how much my 401K gained or lost.

Can you explain how this causes that which begets the other?

Producers of items are charging more, right?
And the consumer price index is a measure of what, exactly?
And a disparity between these indices is bad because...?

Any help for the challenged is appreciated.

Thanks.

[lastknowngood]

4. take a trip to urbansurvior.com he does a good job of explaining

the numbers and as they said it ain't good it looks like deflation.

[Don Claybrook]

6. Thanks...I'll do that now. n/t

[On the Road]

5. PPI Outpacing CPI is Actually Mixed News

It means that businesses are paying more for materials and inventory, but are not passing those increases along to consumers.

It's good news in that you and I are not paying more for everyday expenses. The alternative is consumer inflation, which might make the Federal Reserve raise interest rates to slow the economy down again.

It's bad news because businesses are having their profit margins squeezed. If a business is not making money, they are less likely to hire or to make major investments.

In addition to losing jobs overseas, this may be one reason for the weak job market and the sluggishness of the so-called recovery.

[Don Claybrook]

8. Thanks to you, also. That helped. n/t

[ender]

10. okee dokee...

>Producers of items are charging more, right?

No - the PPI measure the costs of producing the product.

>And the consumer price index is a measure of what, exactly?

The CPI is a measure of how much the end-consumer pays for a product

>And a disparity between these indices is bad because...?

You would normally expect producers to pass along any cost increases to the consumers. if the CPI is not increasing along with, or greater than the PPI, producers are unable to pass their increased costs to the consumers.

this is called a "lack of pricing power", and is a pretty clear indicator of a deflationary cycle.

it means that producers will try to decrease their costs, mostly by decreasing employment/wages, as they are not in control of the cost of their raw materials - which in this case includes oil - for shipping and energy.

[xchrom]

3. we've been feeling it here in

northern california -- i just laugh when greenspin says inflation is under control -- i can't get any more raises until there's more business but the cost of living hasn't stopped going up.

[spinbaby]

7. Didn't think it was my imagination

I've been tracking prices on my PDA for the last four years or so and have noticed some 30 to 40% jumps in the prices of very ordinary things like cat food and paperback books.

Causes? I don't know but I'd guess energy, the shrinking dollar, and just plain corporate greed.

[sadiesworld]

9. WTF happened with the price of paperbacks?

Generally,I buy hardback political books when they come out and go to the library the rest of the time. But at Christmas I bought a few paperbacks for my mother-in -law and was blown away!!!!!

[papau]

11. The Gov site said not to expect PPI until June! - even good news gets lied

about!

http://www.bls.gov/news.release/ppi.toc.htm

Producer Price Indexes -- January 2004

The Producer Price Index for Finished Goods advanced 0.6 percent in
January, seasonally adjusted, the Bureau of Labor Statistics of the U.S.
Department of Labor reported today. This increase followed a 0.2-percent
gain in December and a 0.2-percent decline in November. Rising prices for
gasoline led the increase in the finished goods index in January. At the
earlier stages of processing, prices received by manufacturers of
intermediate goods moved up 0.8 percent in January, after rising 0.4
percent in the prior month. The crude goods index increased 2.8 percent,
compared with a 2.2-percent rise in December. (See table A.)

Among finished goods, the index for finished energy goods jumped 4.7
percent in January, following a 1.6-percent advance in the previous month.
Excluding prices for gasoline, the finished goods index rose 0.2 percent in
January. Prices for finished goods other than foods and energy increased
0.3 percent, after edging down 0.1 percent in the preceding month. By
contrast, the finished consumer foods index dropped 1.4 percent in January,
after inching up 0.1 percent a month earlier.

Before seasonal adjustment, the Producer Price Index for Finished
Goods advanced 0.6 percent to 145.4 (1982=100). From January 2003 to
January 2004, finished goods prices rose 3.3 percent. During the same
period, the indexes for finished energy goods, finished consumer foods, and
finished goods other than foods and energy moved up 11.4, 4.2, and 0.9
percent, respectively. At the earlier stages of processing, prices for
intermediate goods increased 3.8 percent for the 12 months ended in January
2004, while the index for crude goods jumped 13.7 percent.

Prices for finished energy goods increased 4.7 percent in January,
after registering a 1.6-percent gain in the prior month. Leading this
acceleration, the gasoline index surged 14.1 percent, following a 3.4-
percent rise in December. Prices for home heating oil and liquefied
petroleum gas also advanced at a faster rate in January than they did a
month earlier. The index for residential natural gas turned up, following
a decline in the previous month. On the other hand, the rate of increase
for residential electric power prices slowed from 0.5 percent in December
to 0.1 percent in January.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and
Components climbed 0.8 percent in January, compared with a 0.4-percent
advance in December. Prices for intermediate energy goods, materials for
nondurable manufacturing, and materials for durable manufacturing increased
at a faster rate in January than they did in December. The index for
materials and components for construction turned up, after edging down in
the preceding month. On the other hand, the index for intermediate foods
and feeds fell at a quicker pace in January than it did a month earlier.
Excluding foods and energy, prices for intermediate materials advanced 0.6
percent, after inching up at a 0.1-percent rate in December. (See table
B.)


Prices for materials for nondurable manufacturing climbed 1.3 percent
in January, <snip>
*****
The Producer Price Index data for January 2004 in this release were
originally scheduled for release on Feb. 19, 2004.

The date of release for the February 2004 Producer Price Index data,
originally scheduled for March 12, 2004, will be announced as soon as
possible.

-6-

NAICS Conversion

The net output price indexes have been converted from the 1987
Standard Industrial Classification (SIC) basis to the 2002 North American
Industry Classification System (NAICS) basis with the release of January
2004 indexes. The NAICS conversion involves major definitional changes to
many of the currently published SIC-based indexes. SIC-based indexes are
no longer produced or published. Historical index data based on the NAICS
publication structure are available depending on the scope of the
definitional changes between SIC and NAICS. A concordance between the two
structures is available at http://www.bls.gov/ppi/ppinaics.htm through a
World Wide Web site.



Recalculation of Seasonal Adjustment Factors

Effective with this release, seasonal adjustment factors have been
recalculated to reflect price-movement patterns during 2003 for stage-of-
processing (SOP) and commodity-grouping indexes. This routine annual
recalculation may affect previously published seasonally adjusted indexes
and percent changes for January 1999 through December 2003. To request
this information, contact the Division of Industrial Prices and Price
Indexes, Section of Index Analysis and Public Information at ppi-
[e-mail] or [phone].

[alfredo]

12. I think the dollar is going up. I seem to remember something

on that either today or yesterday.