Tame Wholesale Inflation Via PPI, Retail Inflation May Still Be Transitory

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Inflation is transitory… That is what you are told over and over by the likes of Ben Bernanke and friends at the Federal Reserve.  The reading of wholesale inflation, measured by the Producer Price Index from the Labor Department, came in at +0.2% for May in both the nominal headline PPI and in the core PPI readings.

Dow Jones was calling for +0.1% on the headline PPI and a reading of +0.2% on the Core PPI that backs out food and energy.

Where the reading was higher was on the intermediate goods as that figure rose by +0.9% in May.

If these numbers sound high to you, go back to that word “transitory” as they were actually all lower gains versus the month of April and this was the lowest reading in months on nominal PPI.  The drop in oil still came to a 2.7% gain in gasoline prices due to a lag but a drop in the food prices helped keep this in check after months of gains.

The real picture is the year-over-year data, and that won’t look transitory to most consumers.  The gains by that count were +7.3% in the headline PPI data and +2.1% on the core reading that kicks out food and energy.

The yearly data looks awful, but the month over month data is actually very manageable.  This is also the PPI and on the surface the data is not strong enough to send prices skyrocketing on the more important measure of retail inflation in the Consumer Price Index.