Wholesale Inflation - Energy And Cars Taketh Away And Giveth Back

By: Paul Kasriel | Wed, Dec 20, 2006
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In September and October, energy prices at the wholesale level fell. In November, they rose. In October, motor vehicle prices at the wholesale level fell. In November, they rose. In September and October, seasonally-adjusted wholesale prices at the finished goods level fell 1.3% and 1.6%, respectively. In November, these prices rose 2.0%. Even with the latest month's increase, the November level of the finished goods PPI remains below the April level. Looking at producer price changes on a year-over-year basis in order to separate the signal from the noise, the chart below suggests that cyclical peak for finished goods inflation occurred back in September 2005 and for intermediate goods inflation in October 2005. At less than 1% year-over-year, finished goods PPI inflation in November hardly looks threatening. As an aside, at the consumer goods level, Circuit City's disappointing latest quarterly earnings report suggests that there might be a whiff of deflation in the air. From flat screen TVs to the McMansions to watch them in, prices are falling absolutely. And the sellers of these products are not making it up on volume. Are the big-box retailers and home builders following in the footsteps of the Big Three auto producers?



Paul Kasriel

Author: Paul Kasriel

Paul L. Kasriel
Director of Economic Research
The Northern Trust Company
Economic Research Department
Positive Economic Commentary
"The economics of what is, rather than what you might like it to be."
50 South LaSalle Street, Chicago, Illinois 60675

Paul Kasriel

Paul joined the economic research unit of The Northern Trust Company in 1986 as Vice President and Economist, being named Senior Vice President and Director of Economic Research in 2000. His economic and interest rate forecasts are used both internally and by clients. The accuracy of the Economic Research Department's forecasts has consistently been highly-ranked in the Blue Chip survey of about 50 forecasters over the years. To that point, Paul received the prestigious 2006 Lawrence R. Klein Award for having the most accurate economic forecast among the Blue Chip survey participants for the years 2002 through 2005. The accuracy of Paul's 2008 economic forecast was ranked in the top five of The Wall Street Journal survey panel of economists. In January 2009, The Wall Street Journal and Forbes cited Paul as one of the few who identified early on the formation of the housing bubble and foresaw the economic and financial market havoc that would ensue after the bubble inevitably burst. Through written commentaries containing his straightforward and often nonconsensus analysis of economic and financial market issues, Paul has developed a loyal following in the financial community. The Northern's economic website was listed as one of the top ten most interesting by The Wall Street Journal. Paul is the co-author of a book entitled Seven Indicators That Move Markets.

Paul began his career as a research economist at the Federal Reserve Bank of Chicago. He has taught courses in finance at the DePaul University Kellstadt Graduate School of Business and at the Northwestern University Kellogg Graduate School of Management. Paul serves on the Economic Advisory Committee of the American Bankers Association.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The information herein is based on sources which The Northern Trust Company believes to be reliable, but we cannot warrant its accuracy or completeness. Such information is subject to change and is not intended to influence your investment decisions.

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