The inflation bugs finally got some good gossip to discuss around their campfire. The nominal PPI data was listed as +1.7%, but the core reading on an ex-food and energy basis was ‘only’ +0.2%. The figure for intermediate goods was listed as +1.8%. We were looking for a figure of +1.0% on the nominal rate from Dow Jones and were looking for +0.1% on the core rate.
What will be important here is not just the 8% in energy, but the notion that the prices are creeping higher in the supply chain via those intermediate goods. Finished goods were up 1.7%. With core prices still low, this does not force the Fed to enter the Exit-Trade you keep hearing about. But the pressure is building.
There is also the notion that the inflation is going to be harder to pass on to the retail level because the consumer is very price conscious and is willing to go elsewhere or anywhere for a lower price.
JON C. OGG
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