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| January Producer Prices (Revised GRA Update) - Feb. 17, 2006 |
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Summary
The Labor Department reported this morning that producer prices in January rose 0.3%, versus December's revised increase of 0.6% (originally reported as +0.9%). During January, the so-called "core" rate, which excludes food and energy, rose 0.4%. This compared with December's gain of 0.1%.
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* The Labor Department reported this morning that the Producer Price Index rose 0.3% during January, which followed a revised 0.6% increase in December. Prior to annual revisions, the December gain stood at 0.9%.
* The January increase was led by items other than food and energy, since the former was up only 0.2% during the month, while the energy component was unchanged.
* Excluding food and energy, or the so-called "core" rate, the PPI rose 0.4% during January.
* The consensus estimates for overall as well as core results were around 0.2%. Thus, the consensus prediction was on the low side of both numbers actually reported.
* For the 12 months ended January 2006, the overall PPI stood 5.7% higher than a year earlier. During the 12 months ended January 2005, this figure was +4.1%, indicating two important trends: the PPI's above-average change of the last couple years not only has persisted, it also has accelerated.
* The monthly core rate exceeding the overall rate is a rare event. Nevertheless, I continue to de-emphasize the far more moderate changes in the "core" PPI over the last couple to few years. In an economy that consumes as much energy and food as ours does, it is little more than a foolish measure constructed primarily to provide Washington and Wall Street a means of trying to fool people about their true costs of doing business and living.
Next Wednesday (2/22), the Labor Department will release the CPI for January, the third and last of the government inflation series we follow closely each month (import prices, PPI and CPI). Afterwards, I will publish a more detailed analysis of all three measures, which will incorporate the annual revisions the Labor Department has just made. I will also update the "Inflation Watch" graph on the home page of the GRA website.
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