July Producer Price Index

Signs of accelerating inflation continue to be absent in the economy.  The latest Producer Price Index (PPI) figure from the Bureau of Labor Statistics shows prices paid by wholesalers were unchanged in July.  Of course, this tally includes the volatile food and energy components, so it is worth looking at the “core” number which excludes these items.  Core PPI increased 0.1 percent, hardly an alarming uptick.
Looking into the earlier stages of production does not reveal reasons to be concerned about significant price pressures either.  The intermediate stage of production (lumber) was also unchanged in the period.  The crude stage (timber) was up 1.2 percent for the month which is in line with the range it has experienced during the last 13 months.
Many continue to debate about what the central bank’s next action should be.  The discussions center on the idea of the Federal Reserve easing its Quantitative Easing.  One side of the argument (this group is known as hawks) is concerned about inflation.  Figures like this month’s PPI report do not support the claim that upward moving prices are gaining momentum.  Instead, the PPI figure sides with those advocating continued accommodation (the doves).  Ben Bernanke and his cohorts meet again in September, and their policy announcement might be the most anticipated release from the committee in a while because there is speculation that the announcement will disclose the bank is reducing its support.  Atlas is concerned about the long-term unintended consequences of the central bank’s behavior but is not of the opinion that the Federal Reserve will change its actions in the next meeting since there are no signs of inflation growing too quickly.  (by C. Cox)