PPI Shows Wholesale Inflation on the Rise

The Labor Department has reported the level of wholesale inflation measured by the Producer Price Index. The reading for the month of July came in at +0.3% on the headline report, but the core rate that backs out food and energy came in at +0.4%. This is hotter than expected, but there may some silver lining here.

Bloomberg was calling for a reading of +0.2% on the headline as well as a +0.2% reading on the core PPI. The results compared to the first reports of June at +0.1% on the headline and +0.2% for the core PPI reading. Dow Jones was calling for +0.3% on the headline reading.

Energy prices were down by 0.4% but crude goods were up by 1.8%.

It is important to realize that these producer price index readings are a day ahead of the consumer inflation report, due Wednesday at 8:30 AM EST. Bloomberg is calling for +0.2% on the headline CPI data and calling for +0.2% on the core reading that takes out food and energy.

Investors can perhaps take at least some comfort in the producer price data as it almost always takes a few higher readings before those prices start to show as actual inflation at the consumer level. Generally speaking, the businesses just have to absorb higher costs until they all have to start passing on the higher costs to Joe Public.

JON C. OGG