Huge Producer Price Jump Suggest Inflation Taking Hold

The producer prices index increased 1.2% in July, double what the street was expecting, but down from the 1.8% jump in June. Core PPI, which excludes volatile commodity prices, soared 0.7%, well ahead of the 0.2% reading the market was expecting.

The one spot of good news is that the numbers tracked a period when commodity prices had reached their peak, and don’t yet reflect the plunge since.

Still, PPI and Core PPI rose 9.8% and 3.5% respectively year over year. The last time inflation was running this hot, Paul Volcker was Fed Chief and Ronald Reagan was in the Oval Office.

The consensus appraisal of the situation is that the Fed will look past this report, given the fact that the commodity bubble burst just after the period these PPI figures measured, If the August numbers continue to show higher prices, however, expect this to change.

Graph courtesy Briefing.com

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