By Mark Huffman
ConsumerAffairs.com
December 15, 2009
Did someone mention inflation? It's been a long time since rising prices have been much of a concern, but the Labor Department's report Tuesday that the Producer Prices Index rose 1.8 percent last month has a lot of economists mentioning the "I" word again.
"Basically, since the onset of the financial crisis, wholesale costs have been declining," said Joel Naroff, chief economist for Naroff Economic Advisors, in Holland, Pa. "Even excluding food and energy, prices were up sharply and also are higher than they were a year ago."
So, what do the details tell us? Naroff says they are somewhat less worrisome.
"Clearly, energy played a major part in the surge and petroleum prices have come down," he said. "But food was up too much and despite what economists may think, people do eat and there is a fairly direct path from wholesale to retail food costs."
In the consumer goods category, the PPI shows the changes were totally mixed. Naroff says that probably means there isn't a major, broad based price increase trend under way.
"We also saw some increase in capital goods prices but I am not overly worried about that," he said.
While energy prices soared last month, there seems to be little momentum to carry them higher. In fact, gasoline prices still seem unusually high, considering that the price of oil has fallen nine straight days and the latest inventory data from the U.S. Government shows wholesalers still have near record levels of both oil and motor fuels.
Despite this, gasoline prices remain only about a dime a gallon below their high for the year.
