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August 19th, 2008

Oil Isn’t Just to Blame Anymore



The producer price index (PPI), also referred to as wholesale inflation, or the prices paid to producers, rose 1.2% in July, down from a 1.8% gain in June. “Core” prices, which exclude the cost of food and energy, increased 0.7%, representing the largest monthly core increase of the year.

What’s troubling about these numbers is that often enough in recent months, inflated prices could solely be blamed on rising energy costs. Now we’re seeing core prices rise across the board from various reports. The core PPI rose over three times what economists had forecasted, while the “headline” PPI, which includes the cost of food and energy prices, gained 0.7% above forecasts. Also, this report follows July’s 0.8% gain in consumer inflation. The good news is since the price of oil peaked at over $147 a barrel in July, prices have fallen some $35 dollars a barrel, and should ease inflation’s grip into August.

Bloomberg.com reports:

Oil prices have dropped 21 percent since the start of last month, copper is down 15 percent and corn has dropped 14 percent, helping ease the cost pressures on companies. Federal Reserve officials anticipate the economic slowdown, along with a stabilization in commodity costs, will help contain inflation.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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