Sunday August 24, 2008

US PPI wholesale inflation rate hits 9.8%, a 27-year record high

channelnewsasia.com :

US economic reports released on Tuesday [19 Aug 2008] showed wholesale prices spiked dramatically in the past year while new home construction slumped heavily last month, dragging down US financial markets as investors worried about already fragile economic growth. The Producer Price Index (PPI), a key wholesale inflation gauge, rose by 9.8% in July from a year ago, the biggest surge in 27 years since a 10.4% gain recorded in June 1981. Economists said producers may be trying to pass on increased costs as rising commodity prices sweep through the economy. This could further stretch consumers already being stressed by a continuing credit crunch and a long-running housing market slump. The central bank could in theory hike interest rates to cool inflationary pressures, but its hands are tied by the housing and credit crisis.

- The CPI inflation rate figures are likely to have a political bias, what with stuff like core inflation rate and hedonic adjustments being thrown in. That's what is published in the mainstream media and that's what the citizens tend to focus on. On the other hand, it's mostly businessmen, traders and the investment community in general who also look at the wholesale inflation figures, so these are likely to have less of a political bias.

Hence, the American wholesale inflation rate going at a 27-year high of 9.8% is really telling, and is indicative of a highly inflationary future to come. Even the politically-charged American CPI inflation rate figures are going at 5% or so. Many hopeful economists are saying that this is due to the record oil prices in recent months and also that with the recent correction in NYMEX crude oil prices, inflation might be easing off a bit. But I say, compared to what is coming, this is really nothing. Commodity prices are already in recovery mode. The hyperinflationary starship has just left the space dock and the hyperdrive is not yet warmed up. We haven't seen anything yet!

See also :

1. Japan wholesale inflation hits 27-year high of 3.9% in Mar 2008
2. Europe inflation hits record 4% in June 2008; Germany, France inflation rate at 15, 17 year highs
3. Singapore CPI inflation rate for May 2008 continues at 26-year high of 7.5%

(2008-08-24 10:34:17 SGT) [Biz] Permalink

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