August Producer Prices

Inflation eased in August according to the Bureau of Labor Statistics’ most recent release on the Producer Price Index (PPI).  The month-over-month rate was flat while the year-over-year figure slowed to 6.5 percent from July’s reading of 7.2 percent. The core rate of inflation, which subtracts food and energy, ticked up 0.1 percent for the month and remained at 2.5 percent year-over-year.  Inflation has been a concern for many in the investment world, but the Atlas crew must be from another planet because price increases are not keeping us up at night.

There has been unprecedented monetary influence exerted by the world’s central bankers over the past few years. In fact, our own central bank will be celebrating the third anniversary of its virtually zero percent overnight interest rate in December, and it has committed to keeping the rate nailed to the floor for another two years.  While under different circumstances this action may have alarmed Atlas, we are presently more concerned about consumption than low interest rates.  Easy money policies can only help push prices higher if consumers are willing to spend.  The pace of the recovery does not illustrate an overwhelming willingness by Americans to hastily part with cash, and consumer attitudes about the future certainly are not pointing to a change in that part of the zeitgeist.  Atlas understands that at some point consumer behavior will change, we just think it will take a new group of consumers to start the trend.  These consumers exist, but unfortunately, aren’t old enough or wealthy enough yet to power the nation through its current headwinds.