The Producer Price Index for Finished Goods moved up 0.2 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed a 1.8-percent advance in November and a 0.3-percent increase in October. At the earlier stages of processing, prices received by producers of intermediate goods rose 0.5 percent and the crude goods index moved up 1.0 percent. On an unadjusted basis, prices for finished goods advanced 4.4 percent in 2009, after falling 0.9 percent in 2008.
This is good news on several fronts. First, you want a little inflation (how much is "a little" is debatable.) However, a little inflation indicates that somewhere in the system there is either enough cost push or demand pull inflation to keep prices moving higher. Secondly, a deflationary threat got us into this mess. These numbers indicate that the deflationary scare is receding. This is clearly illustrated in this 12-month chart of the YOY change in PPI:
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It's important to remember the YOY number is subject to an incredibly low comparison number. As a result, higher numbers on the YOY comparison are likely for some time.
