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October 18, 2005

Producer Price Index disappointment, Mon., Oct. 17, 2005, 8:37 AM

Stocks this morning will not like the U.S. PPI number just reported for September, which was up +1.9 pct M/M, and well ahead of Street estimates of +1.2 pct. Once again Wall Street economists can't get it right.

Based on the so-called core rate, which is ex-energy and food, the producer price inflation was up +0.3 pct M/M, which was also higher than expected.

I'll add the report and the updated chart from Haver Analytics to this article as soon as I receive it.

But for now, I think traders can get the sense that the equity and bond market bulls will be disappointed with this PPI number.

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U.S. Sept. PPI up 1.9%, most in 31 years
By Rex Nutting

WASHINGTON (MarketWatch) - "U.S. wholesale prices rose 1.9% in September, the biggest jump in 31 years, the Labor Department said Tuesday. Price increases were led by a 7.1% rise in wholesale energy prices, the biggest jump in 15 years. Food prices also soared, rising 1.4% on a record 49% increase in egg prices. The producer price index for finished goods has increased 6.9% in the past 12 months, the fastest rise in prices in 15 years. Core prices, which exclude food and energy, increased 0.3% as prices for capital goods increased 0.3%. The core rate is up 2.6% in the past year, down from 2.8% in August."

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As any person can see, there is a PPI problem. Why is there so much talk on Wall Street and among the mass media that inflation is not a problem? It is, as I will always say, because they have a vested interest to promote a stable environment where they can sell their goods and services. There is nothing wrong with having such a bias if that is in fact your sell-side job. But if you are on the buy-side, which happens to be the huge majority of the owners of capital, then you have to factor in that bias in your investment analysis.

Posted by Posted by Bill Cara on October 18, 2005 08:39:00 AM | Category: Economics

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