September Producer Price Index

The Producers Price Index (PPI) was mixed in the month of September according to the Bureau of Labor Statistics.  The headline figure rose by 1.1 percent for the month.  The less volatile core number was left virtually unchanged.  The headline’s increase was dominated by a surge in energy and a more modest uptick in food prices, both of which are not part of the core figure.

After being negative for nine out of ten months, energy has come back strongly in August and September.  Producers paid 4.7 percent more for energy in September after the 6.4 percent hike in August.  Gasoline pushed the sub-index higher with a jump of 9.8 percent itself.  There were also slight price increases seen in diesel fuel and residential natural gas.

Purveyors of things to eat saw food costs rise by 0.2 percent.  This follows consecutive gains in the prior three months.  Vegans will be happy to hear that a large part of September’s food increase came from a 2.8 percent increase in the dairy products they do not eat.  These conscientious eaters will be less happy to hear about the 11.2 percent surge in the costs of fruits and melons.

There seems to be many reasons to fear inflation these days and an equal number of compelling arguments against significantly higher overall prices manifesting.  One side points to things like higher food and energy costs as well as the government’s fiscal approach or the central bank’s monetary policies.  The other side feels America’s demographics will keep prices from growing too quickly or that the gap between potential output and actual output is large enough to allow additional economic growth without stoking the flames of higher prices.  The latest PPI reading does not help resolve the debate with its mixed headlines, but it will get a chance to try to prove one side or the other of the argument next month.     (by C. Cox)