Folks, I’m sitting here with my coffee, reading about the latest news on inflation, and I have to say, it’s a mixed bag. Businesses’ costs aren’t rising as fast as they have been in recent months, which could mean that price hikes might slow down for consumers in the months ahead. The Producer Price Index, which tracks price changes for producers and manufacturers, increased 4.7% in the 12 months that ended in July. That’s a slowdown from 5.5% in June, according to the Bureau of Labor Statistics data released Thursday. I’m not getting too excited, though – we’ve seen this before, and it’s not like inflation is going away anytime soon.
The monthly basis prices were unchanged after falling 0.1% in June, which is better than economists expected. The PPI is a closely watched measure of wholesale inflation, and it serves as a potential bellwether for what consumers could experience in the near future. However, the higher prices businesses pay each other aren’t always fully passed on through the supply chain. You’d think that would be a good thing, but it’s not like businesses are just going to absorb those costs and not pass them on to consumers.
Wholesale inflation is cooling off after the war in Iran caused a spike in oil and gas prices and other commodities. Producer-level inflation climbed to a four-year high of 5.9% in May before falling energy prices cooled things off a bit in June and July. Wholesale food prices also declined for the second month in a row. I’m not sure what’s more surprising, the fact that food prices are going down or that gas prices aren’t skyrocketing like they were a few months ago.
But since oil and gas prices can vary widely on a monthly basis and are subject to more on-time shocks – especially in the wake of a war – economists closely watch “core” inflation gauges that remove volatile components. Core PPI, which excludes food and energy prices, rose 0.2% in July and slowed to 4.2%, the lowest rate in four months. On Wednesday, the July Consumer Price Index showed that inflation of commonly purchased goods and services cooled for the second month in a row to an annual rate of 3.4%. It’s not like we’re out of the woods yet, though – prices are still rising much faster than they typically do.
The latest PPI report may portend slower inflation to end the summer, but fuel prices remain a wild card because of the ongoing Iran conflict, noted Ben Ayers, senior economist for Nationwide. And while Thursday’s report paints a picture of a broader easing of wholesale inflation, it also highlights some more localized pressures. Semiconductor and other electronic component manufacturing prices, for example, are up 27.1% annually from a year ago, easing from the 27.7% annual rate notched in June. It’s like the economy is a big game of whack-a-mole – as soon as one problem gets solved, another one pops up.
In conclusion, the economy is a complex beast, and it’s hard to predict what’s going to happen next. But one thing’s for sure – inflation is still a major concern, and we’re not out of the woods yet. As I finish my coffee, I’m left thinking that maybe, just maybe, things will start to calm down soon. But I’m not holding my breath – after all, as the saying goes, “pride comes before a fall,” and I don’t want to get too comfortable just yet. 🙄
Armchair patriot. Believes in the free market, cold beer, and that there’s always a guy named George behind every CNN segment.
Former remote-throwing champion turned #1 couch commentator on liberal panic in the media. Born in Texas (or so his mug says), he earned a degree in Fake Newsology & Beer Philosophy from YouTube University.
