Tuesday, September 18, 2007

PPI -1.4%, core up .2%

From the BLS:

The Producer Price Index for Finished Goods fell 1.4 percent in August, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decrease followed a 0.6-percent increase in July and a 0.2-percent decline in June. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved down 1.2 percent in August compared with a 0.6-percent advance in July, and the crude goods index dropped 3.0 percent after climbing 1.2 percent in the prior month. (See table A.)

According to the report, energy prices dropped 6.6% and food prices dropped .2%. The change in finished goods increased (unadjusted) 2.2% from a year ago, which is the slowest increase since January of this year.

I assume the Fed has advance information on the economy and economic statistics. I have no basis for this belief, other than they are the Governors of the Federal Reserve and they are therefore entitled to advanced information. That being said, I am assuming the Fed has this information awhile ago. This news gives them more wiggle room regarding interest rates. However, until their latest statement about the discount rate, they have continually stated in their policy statements that inflation is still a concern. So they'll have to either backtrack on that observation or continue to argue the threat to long-term growth is more important.