Oil Isn’t Just to Blame Anymoreby Tim Manni
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.
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.