The Producer Price Index for Finished Goods rose 0.2 percent in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed a 0.5-percent decline in
June and a 0.3-percent decrease in May. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved down 0.4 percent in July and the crude goods index rose 2.7 percent. On an unadjusted basis, prices for finished goods advanced 4.2 percent for the 12 months ended July 2010, their ninth consecutive 12-month increase. (See table A.)
So that seems to be ok, right?
Well, is it?
Where did the 0.3% increase come from?
Almost half of the July advance can be attributed to a 1.5-percent rise in prices for light motor trucks.
Oh that’s nice. So the car makers (read: Government Motors) are jacking the price of light trucks, and this is seen as “supportive” of the economy and markets. (Higher prices are good, right? Especially in a credit-constrained economic environment?)
The Producer Price Index for Intermediate Materials, Supplies, and Components moved down 0.4 percent in July, its second straight decrease. Prices for both intermediate materials other than foods and energy and for intermediate foods and feeds fell 0.4 percent in July.
So at an intermediate level there’s no pricing power? Or is this just a relaxation of an unsustainable trend?
On a 12-month basis, prices for intermediate goods climbed 6.4 percent for the second consecutive month. (See table B.)
Answer: The latter.
Crude core: The index for crude nonfood materials less energy decreased 1.4 percent in July. From April to July, crude core prices fell 7.6 percent following a 9.7-percent advance in the previous 3-month period. Leading the July monthly decline was a 6.7-percent drop in the index for iron and steel scrap. A decrease in the index for wastepaper also contributed to lower crude core prices.
Demand? DEMAND?! Where?
Yeah.
The only thing supportive in the crude goods area is in food and energy, incidentally the two things that the “inflation watchers” don’t count but which are two things every American must buy to remain above room temperature.
Pretty amusing on an analytical basis until you realize that into declining wages (and they are) what’s happening is that the American middle class is being disemboweled month-by-month, destroying aggregate demand.
What else would one expect from economic policies in our government that are bereft of actual analysis – or common sense? Propping up the leverage-abusers at the expense of the common man is simply going to continue to exacerbate this problem over time.
Welcome to the “New Normal”: Got hard hat?
