Summary
Earlier this week, the Labor Department reported on both consumer and producer price behavior during March. Although the methodology now employed with these measures succeeds at blunting the truth about inflationary pressures, both measures still showed disquieting strength during March.
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Earlier this week, the Labor Department reported that the Producer Price Index rose 0.7% during March, a bit worse than a consensus forecast that was looking for a 0.6% increase. This compared with a rise of 0.4% in February.
Yesterday morning, Labor reported that the Consumer Price Index was up 0.6% in March, again, a bit worse than a consensus forecast that was looking for a gain of 0.5%.
Excluding food and energy -- the so-called "core" rate -- the PPI was up 0.1% during March, while the CPI's core rate rose 0.4% during the month. In February, the respective PPI and CPI core changes came in at 0.1% and 0.3%.
I have been consistent over the years in expressing the opinion that it is nothing short of moronic to make a big deal of life as a consumer void of price considerations relating to eating, heating, driving, etc., or life as a businessman in which energy prices in particular are taken so lightly.
However, this is done all the time by Wall Street. Well, not quite all the time -- only in instances when the removal of food and energy costs results in more favorable inflation data.
And as an aside, do you imagine that anyone in a position of power at the Federal Reserve really believes this nonsense? If so, the United States is in far greater trouble than is generally realizied. On the other hand, can those at the Fed who might fully appreciate how dreadful the accuracy of these numbers is let on? Certainly not in public, which means that monetary policy suffers as a result.
Nevertheless, even the core rates of both the PPI and CPI are showing uncomfortable trends. As of March 2005, the PPI's year-over-year core rate was up 2.6%. The 12-month change as of March of 2004 was 0.6%. As for the CPI, its year-over-year change as of March 2005 was 2.4%, versus 1.6% as of March 2004.
Of course, including food and energy, the comparisons are worse in both indexes. The PPI, as of March 2005, showed a year-over-year change of 4.9%, versus 1.5% as of March 2004. For the CPI, the March 2005 year-over-year gains was 3.2%, compared with 1.7% in March of last year.
NOTE: The applicable portions of the data shown in the tables below will be posted to the "Data & Charts" section of the GRA website.
Producer Consumer Import
Price Index Price Index Prices
Month/ ----------------------------------------
Year Y/Y L3Mos* Y/Y L3Mos* Y/Y L3Mos*
------------------------------------------------
03/05 4.9% 5.7% 3.2% 4.3% 7.1% 13.3%
02/05 4.7% 1.1% 2.9% 1.7% 6.0% -0.4%
01/05 4.2% 2.1% 2.9% 1.3% 5.7% -4.5%
------------------------------------------------
*Trailing three-month com-
pound annual rate of change.
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Producer Price Index
(Finished Goods)
-- Y/Y Change
---------------------------
Excl. Food
Year All Items & Energy
---------------------------
2004 4.3% 2.2%
2003 4.0% 1.0%
2002 1.2% -0.6%
2001 -1.8% 1.0%
2000 4.1% 1.6%
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Consumer Price Index
(All Urban,
All Items)
-- Y/Y Change
---------------------------
Excl. Food
Year All Items & Energy
---------------------------
2004 3.4% 2.2%
2003 1.9% 1.1%
2002 2.4% 2.0%
2001 1.5% 2.7%
2000 3.4% 2.6%
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