We have been patiently listening to most of the Mr. Bernanke’s comments that inflation is not a threat. Even with the latest minutes and statement of the Fed, there is a clear majority who favor keeping rates low for an extended period of time with one notable dissension.
There is no way to rule out that the exceptional amount of money that has been “printed” is not helping to spur on some increased pricing as can be seen in the most recent PPI report. With a dollar that is being targeted by traders and quantitative easing continuing, we are sure to see the prices of materials move higher. Of course, we know what that means for CPI down the road….
- January PPI Y/Y +4.6% vs +4.4% consensus
- January Core PPI Y/Y +1.0% vs +0.8% consensus, prior +0.9%
- January PPI M/M +1.4% vs +0.8% consensus, prior revised to +0.4% from +0.2%
The PPI jumped 1.4% in January after increasing a more moderate 0.4% in December. The consensus estimate called for a 0.9% rise in producer prices. While the difference between the consensus estimate and the reported number looks significant, the miss was actually due to changes in the makeup of the PPI index. In 2009, finished energy goods accounted for 17.8% of the total index. In 2010, the energy goods contribution rose to 21.0%. As a result of the index change, the 5.1% increase in energy costs accounted for 1.1 percentage points of the total rise in PPI.
Disclosure: Horowitz & Company clients may hold positions of securities mentioned as of the date published.