Wholesale Inflation Remains Muted

The Labor Department has released the September Producer Price Index, the measure of wholesale inflation.  We did see a slightly raised Consumer Price Index last week and that had many of the inflation bugs on edge for the wholesale data.  Yet the inflationary pressure appears to be remaining tame.  The headline PPI came in at -0.6% after showing a +1.7% gain in August, and estimates from Dow Jones were -0.2% and estimates from Bloomberg were -0.3%.  The core rate of ex-food and energy came in at -0.1% versus a Dow Jones consensus of +0.1% and a Bloomberg consensus of +0.1%.

This figure reflected a 2.4% drop in energy prices during September after a gain of a sharp 8% the previous month.  Wholesale inflation generally has to heat up before the costs get passed down to the consumer level.  This does not of course take $80.00 oil into consideration, but so far inflation is tame higher up in the supply chain level.

Now all Ben Bernanke and friends at the Federal Reserve have to do to validate the near-zero rate policy is to point to this data.

Jon C. Ogg
October 20, 2009