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.
Wage increases are NOT a cause of inflation in any manner. Claims that they are are economists' at best' trying to discourage wage increases so that the wage cost to industry will decline and mitigate the effects of the inflation. At worst those economists are Keynesian Economists and know little or nothing about economics, their specialty lies in being apologists for government use of the money supply to increase government control of the economy and to place more of the assets of the society in government hands.
Low inflation is good news, but when they say that food costs have dropped my BS detector tends to go off.
Perhaps the cost of food dipped a bit in the latest month reported, but long-term this indicator is highly suspect. It is based partly on "equivalents," meaning that if you can buy a second-rate product cheaper than a quality product, the lower-cost item sets the standard.
And has anyone noticed that while the price may be the same, the quantities of some products tend to shrink. For example, potato chips that used to come in six-ounce bags shrank to five and a half ounces, and now some are five ounces.. Of course, the "pound" bag of coffee long ago went to 12 or 13 ounces.
I wonder if the economists who prepare the numbers ever go into a supermarket to shop.. Maybe they send their maids to do it.
Food prices always drop this time of year. It's the beginning of the normal produce harvest across most of the USA. Not necessarily here in south Georgia since we're between produce crops, but most are coming in right now.
No news here on the food front.
His new Treasury Secretary is saying it. I assume he's taking directions from the boss.
Agreed. Now how do we convince the rest of the world?
W took office in January of 2001.
I missed that. When did he say it? Link?
Treasury secretary gives first speech
Maybe you were confused?
It's like when W says we are a nation of laws, but we have to be a welcoming nation. Look at the conditions clause of the statement to determine his true meaning.
So no one said they wanted a weaker dollar.
Irritatingly ignorant headline. Inflation fell from 0.5% in June to 0.1% in July. That means that prices rose 0.1%, but inflation tells us how much they rose. Prices rose more slowly than they did before, so inflation fell.
< /pedantic economist rant>
They say they want a stronger dollar, but mean they want a weaker dollar. If that's a victory to you, you can have it.
I don't have a dog in this fight. You said that Bush said he wanted a weaker dollar. That didn't sound like something Bush would say.
I was right. Thanks.
Where is the dollar index going to go now that the Fed has most likely reached the peak of its rate raising cycle, regardless that Paulson is repeating W's same old line?
Whatever.
Where has the dollar index gone since W has taken office, and the whole time he has said he has supported a strong dollar?
I know the dollar has gone down. W says he wants lots of things. W is not God.
Where is the dollar index going to go now that the Fed has most likely reached the peak of its rate raising cycle, regardless that Paulson is repeating W's same old line?
Down? Maybe you should short the dollar?
That is the best street level definition of inflation going. Devaluation=inflation. Devaluation means lower value of the dollar relative to goods, services, and other currencies. Inflation means that more dollars are "printed" than necessary and so there are more dollars with which to buy the same amount of goods and services and it takes more dollars to buy those things.
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