Posted on 08/15/2006 5:59:39 AM PDT by BenLurkin
WASHINGTON (AP) -- Inflation at the wholesale level edged up by the smallest amount in five months in July as falling food prices helped offset another rise in energy costs. The Labor Department reported that wholesale prices increased a slight 0.1 percent in July, far below the 0.5 percent jump in June. The improvement reflected a retreat in food prices, which fell by 0.3 percent in July, after having surged by 1.4 percent in June, which had been the biggest increase in nearly two years.
Federal Reserve policy-makers broke a two-year string of interest rate increases last week, saying they believed that a slowing economy would help restrain inflation pressures. But some private economists are worried that the relentless rise in energy costs could force the Fed to resume rate increases in coming months.
The 0.1 percent rise in the government's Producer Price Index represented the smallest amount of inflation since wholesale prices actually fell by 1.2 percent in February.
Excluding volatile food and energy, core wholesale inflation fell by 0.3 percent in July. That was the best showing for core inflation in nine months, since a similar 0.3 percent decline last October.
Price pressures have been accelerating this year as energy costs have soared, reflecting rising tensions in the Middle East and tight supplies because of increased demand from emerging economies such as China.
Crude oil hit a record high, closing at $77.03 in New York trading on July 14. The increases in crude prices have pushed gasoline costs above $3 per gallon in many parts of the country, increases that have spurred rising voter unhappiness with the economic policies of the Bush administration.
For July, energy prices were up 1.3 percent, the biggest increase since a 4 percent jump in April. Gasoline prices were up 0.7 percent, natural gas for home use was up 0.9 percent and residential electricity costs jumped 1.8 percent, the biggest increase since January.
Those higher energy costs were expected to show up quickly in higher consumer energy bills. Analysts were forecasting that the Consumer Price Index would register a 0.4 percent increase for July when that figure is released on Wednesday.
Analysts are worried that rising inflation pressures may force the Fed off hold and result in further interest rate increases in coming months.
The 0.3 percent drop in food costs reflected a retreat in a variety of food costs which had surged in June. Egg prices fell by 26.1 percent, the biggest one-month drop in six years while fish prices were down 9.1 percent and soft drink prices dropped by 1.4 percent.
Outside of food and energy, prices were mostly lower with some notable exceptions. Tire prices jumped 3.5 percent, the biggest one-month gain in 27 years.
Offsetting that increase, the price of newspapers dropped by 1.2 percent, the biggest decline in 13 years, while the cost of light trucks was down 3.1 percent and the price of passenger cars fell by 0.8 percent.
WGIDS.
Inflation Rises on Wholesale Level
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Is that the headline? This is some of the best news to hit the market in a long time. Another gem from the AP and Martin Crutsinger.
No. Prises are rising at the wholesale level. That is an indication that there just might be some inflation going on but it is not, itself, inflation. Prices rise and fall all the time, even prices in whole sectors, when there is no inflation. That is the nature of a free market. If there is no inflation, however, a price rise in one ara will be accompanied by a fall in anotheror the disapperance of some other goods from the market. If there is inflation, then a price rise does not necessitate a drop in other prices. The rise is because of more money in the system and is not really a "rise" in real price but rather a fall in the price of money because there is more of it in the market bidding for goods and services.
WGIDS?
From an earlier story:
A Labor Department report today is expected to show wholesale prices are on the rise. Prices paid to factories, farmers and other producers rose 0.4 percent in July after a 0.5 percent gain the previous month, according to a Bloomberg News survey of economists.
This was the perfect chance for a headline saying, "Inflation Much Lower Than Economists Forecast"
Of course they can't do that while Bush is President.
So things will cost more but not to worry because it isn't really inflation?
Wow, man, like that's sooo cool./sarc off
It should be mandatory for anyone majoring in Economics or Finance to spend at least two years having to support themselves using their choice of tools, specifically a choice between a wrench, shovel, lawn mower, or tractor. Then, they might have a little sense of how things actually work, instead of spending eight years or so doing mental mastubation in some ivory tower.
There is no inflation, but there sure is devaluation of the Dollar due to government spending and the trade deficit. This is the cause of much of the "appreciation" in the stock market and real estate. It sure isn't the REAL value of the profits reported by the companies.
A bushel of wheat for a barrel of oil!
Inflation is always something to worry about. It warps the market and makes economic calculation more difficult. Prices really do rise absolutely because a portion of capital is caused by induced miscalculation to be misallocated. Real wages fall in an inflation because labor is the last price to rise. Inflation is government fraud in that it is always embarked upon in order to welsh on the government debt to some extent. Inflation is and is only the creation by the government of money at a greater rate than the market can absorb while keeping the value of the maoney stable. This was explicit in W's announcement of "devaluation" way back in his first year. For a few years the European and Asian banks soaked up most of the extra dollars, thus, in effect, importing American inflation. Now they have a lot of extra dollars for which they have traded real value and the value of their dollar holdings is no greater than it was before they started to increase it. They are tapped out now, unable to act as the dollar landfill for America any more. If they "dumped" the dollars they hold now, as some economic journalists loudly fear, it would cause spectular general price rises in our economy a la Jimmah Cottuh's years. But they won't do that because it would trash their own economies as their "hard" reserves suddenly turn to Charmin.
So why are wage increases portrayed as a cause of inflation?
I don't know if I agree with your entire economic theory, but the government is the cause of inflation, not the private sector, which always gets the blame and the punishment.
The headline is bias. The markets are up and bond yields are down. This is being viewed as very good news on inflation.
Inflation is the domestic devaluation of the dollar. And W keeps stating that he wants a weaker dollar.
This is the cause of much of the "appreciation" in the stock market and real estate. It sure isn't the REAL value of the profits reported by the companies.
Stock market performance has been pathetic under W. And yes much of the increases have been due to more government spending and price increases.
When did he say that?
(by the smallest amount in five months).
Excuse me, but have you looked at commodity pricing lately?
Yes, I have. A dollar buys less stuff than it used to, and therefore the dollar is worth less.
It's really quite simple.
Not sure where you have been investing in the stock market, but if you look at mutual funds which a majority of investors own, by asset class since the market low of October 9th 2002,
Mid Cap Value leads the way up 143%, the only asset classes not up triple digits are Large Growth up 59% and Large Core up 75%. Doesn't seem to be a horrible return to me.
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