Prices vs. Costs: Part II

By Andrew Paparozzi
In May 20, 2008

Is inflation becoming tamer? Similar to the Consumer Price Index (CPI), the Bureau of Labor Statistics (BLS) reported that the Producer Price Index (PPI) for finished goods rose by a less-than-expected 0.2% in April. Also similar to the CPI, muted changes in food and energy prices were the main factors behind the tamer number. But unlike the CPI, prices at the producer level for finished goods excluding food and energy rose 0.4 % in April. While overall results in April were somewhat tamer than expected, data show that there’s considerably more inflation in the pipeline—no pun intended.

If we look at different stages of processing, further upward pressure on costs for producers is quite apparent. Year-to-date, prices for crude materials are up 30.4% compared to a year ago. For the same period, prices for intermediate materials are up 9.7%. And we can’t blame all of it on food and energy. Excluding these components, prices for crude and intermediate materials were still up 20.6% and 5.1%, respectively.

Although the pricing power for many producers isn’t what they would like, this can’t be good news for consumers. The PPI for finished consumer goods excluding food and energy was up 3.1% year-to-date compared to a year ago—double the increase during a similar period last year and the highest increase since April 1999. The weak economy may very well help restrain inflation, but it’s still going to be difficult to soothe the beast.

Joseph Vincenzino

Andrew Paparozzi

Epicomm's Andrew Paparozzi, Vice President/Chief Economist, is well-known for his accurate and thoughtful discussions on the economy and US commercial printing industry. A foremost author and speaker on economic business trends in the printing industry, Paparozzi heads Epicomm's Printing Economic Research Center.

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