PPI runs hot

Sept PPI rose .8% m/o/m, 4 times more than expected led by a 2.3% rise in energy (gasoline prices up 4.2% after 3 mo’s of declines) and .6% gain in food prices. The y/o/y gain is now 6.9% and inflation in the pipeline remains robust. Intermediate goods prices rose 10.5% y/o/y (.6% m/o/m) and 20.9% (2.8% m/o/m) at the crude stage of production. Ex food and energy, prices rose .2% m/o/m, .1% above expectations and are now up 2.5% y/o/y, matching the highest since July ’09. While certainly worth noting today, the market’s attention on inflation will be more focused on tomorrow’s CPI report. With this said, inflation readings I believe are worrisome as its taken hold in an economic environment that is best described as lackluster. And, make no mistake, inflation is a tax and when the wages of the average worker are not rising by the same extent, and in many cases dropping, the standard of living of the average person is falling. The Fed hates deflation (why is the falling price of an IPAD bad I ask them) and they are unfortunately getting what they want, to help the over indebted at the expense of others.

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