Inflation alive and well in the service sector

cnbc ^ | John W. Schoen

[BenLurkin]

Led by a steep slide in energy prices over the last 12 months, prices of a wide range of global raw materials—everything from iron ore to sugar—have been falling lately. That's prompted fears that deflation may worsen a global economic slowdown.

But in the U.S., those fears overlook the long-term growth of services, where price trends have been very different.

...

Falling prices are usually a sign that demand from companies and consumers is weak and that the economy may be hitting a soft spot.

But when the price of services is taken into account, inflation seems less tame than the recent weakness in commodity prices would indicate. Last month, producer prices overall were up 0.3 percent, which works out to an annual rate of 3.6 percent.

The latest numbers "add to the evidence of a now hard-to-ignore resurgence in core inflation over the past few months," said Stephen Murphy, an economist with Capital Economics. "For all the talk of global deflationary pressures this week, we suspect the Fed will be more focused on the growing evidence of mounting domestic inflationary pressures. A September rate hike is coming."

[expat_panama]

Huh. I didn’t know Shadowstats had data on services —unless we’re accepting BLS figs here [shudder]

[BlackVeil]

As they say, commodity prices are falling - but they should note that this does not seem to have any affect on fuel and manufactured goods. Prices still high, and even rising.