Mike Panzner looks at the spread between the PPI and the nonsensical core rate:
Over the past three decades, the spread between the monthly year-on-year reported and "core"(ex-food and energy) Producer Price Index data, while volatile, has steadily widened.
As a matter of fact, the differential hit a multi-decade high of 4.3 percentage points in September, and was only marginally below that level in October (as reported this morning).
In other words, the series that is supposedly more representative of the underlying inflation trend — the "less volatile" number that government officials insist we focus on — seems to be lagging further and further behind the headline statistic.
By one whole percentage point, I reckon, if you draw a simple trendline through the 12-month moving average of the differences over the period.
Spread: Reported and Core PPI
click for larger graphic
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Panzner notes: "Maybe I’m too cynical, but do you think somebody’s having a bit of fun with (government) statistics?"
Did you notice the hedonic gamesmanship causing the large drop in the PPI auto price component? So now a better emission system warrants a hedonic adjustment? I love the environment as much as the next guy but I just dont see the hedonic advantage to a slightly better muffler…
You get a better muffler for the same price. What’s not deflationary about that?
Shouldn’t the improvement of emissions control equipment show up as reductions in the cost of pollution cleanup elsewhere in the PPI? Sounds like a double-count of a cost ‘reduction’…