The Us Bureau of Labor Statistics released new producer price index (PPI) data today, and it’s not good news for consumers.
The PPI is a measure of prices at the production phase of goods and services, and is often an indicator of where consumer prices are headed. Prior to 1978, the index was known as the wholesale price index.
For April this year, year-over-year growth in the PPI came in at over 10 percent for the fifth month in a row, reaching 11 percent. This was a small drop from March’s year-over-year rate of 11.5 percent, but continues to suggest ongoing upward pressure in prices. Ther month-over-month change for April was 0.5 percent, which was a sizable pullback from March’s 1.6 percent month-over-month change, but movement remains upward and from a very elevated base.
Year-over-year changes in the PPI have been over 7 percent for 11 months.
As with the CPI index, the narrative among optimistic analysists was that PPI measures would moderate significantly in April and signal a downward turn. That does not appear to be the case so far. As the AP reports today:
The report included some signs that price increases are moderating, but at a painfully high level … prices are still rising at a historically rapid clip. Food costs rose 1.5% just in April from March, while shipping and warehousing prices leapt 3.6%. New car prices rose 0.8%.
In other words, there are still no indications that inflationary pressures are about to disappear. Moreover, from a policy standpoint, neither the Biden administration nor the central bank have signaled they will be taking any steps that could reliably reverse this trend.
The Biden administration has repeatedly taken a stance in favor of greater regulation which only curtails production, further constraining supply and pushing up prices.
Meanwhile, the Federal Reserve—which has been the primary source of inflation due to its ongoing financial repression policies—continues to embrace nothing more than the most tepid steps toward reining in monetary inflation.
As I wrote here last week, after nearly than a year of very elevated inflation rates, the Fed has said it will not begin reducing its portfolio—thus reducing the money supply—until June. And even then, the scale of the reductions will be miniscule. Moreover, the Fed’s planned increases to interest rates will only raise the target federal funds rate to around two percent, assuming all goes as planned.
These are tiny interventions which will do little to reduce inflation unless they trigger a recession—and then we’ll have both inflation and high unemployment.
