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Wholesale Inflation Heats Up Due To Jump In Car, Food Costs, New Calculation Method
Janet Yellen will be pleased, or maybe not. Producer Price Inflation printed hotter than expected across all its various incarnations (good news, no deflation; bad news, no deflation excuse for The Fed). Ex Food-and-Energy prices rose 1.8% YoY (4-month highs), considerably more than the 1.5% expectations and surged 0.4% MoM - the most in 16 months. PPI Final Demand rose 1.5% YoY (1.3% exp).
The rise in PPI appears driven by Food prices which are up 1.0% (the most since April), car prices (up 1.0%) and pharmaceuticals, but mostly thanks to a new calculation change because as the BLS reports, "In October, a 26.1-percent jump in margins for fuels and lubricants retailing accounted for nearly 40 percent of the increase in the index for final demand services." In other words, of the 0.5% jump in PPI services, 40% was due to a new calculation for in margins for fuels and lubricants retailing.
Away from calculation-fudged services, the story was much different: prices for final demand goods moved down 0.4 percent, the worst monthly tumble in over a year.
So on one hand running hot.
Except for actual goods, which were dragged down by a whopping 3.0% plunge in energy prices, mostly thanks to gasoline.
The breakdown:
Some more details on what caused the move:
- Final demand services: The index for final demand services moved up 0.5 percent in October, the largest increase since a 0.5-percent rise in July 2013. The October advance can be traced to a 1.5-percent increase in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing inched up 0.1 percent. Conversely, the index for final demand transportation and warehousing services edged down 0.1 percent.
- Product detail: In October, a 26.1-percent jump in margins for fuels and lubricants retailing accounted for nearly 40 percent of the increase in the index for final demand services. The indexes for machinery, equipment, parts, and supplies wholesaling; food and alcohol retailing; food and alcohol wholesaling; inpatient care; and traveler accommodation services also moved higher. In contrast, prices for airline passenger services declined 0.7 percent. The indexes for loan services (partial) and for chemicals and allied products wholesaling also decreased
- Final demand goods: The index for final demand goods moved down 0.4 percent in October, the fourth consecutive decrease. The October decline was led by prices for final demand energy, which fell 3.0 percent. The index for final demand goods less foods and energy edged down 0.1 percent. Conversely, prices for final demand foods moved up 1.0 percent.
- Product detail: Over 80 percent of the October decline in prices for final demand goods can be attributed to the index for gasoline, which dropped 5.8 percent. Prices for liquefied petroleum gas, prepared animal feeds, home heating oil, diesel fuel, and ethanol also moved lower. In contrast, the index for meats increased 5.3 percent. Prices for electric power, pharmaceutical preparations, and passenger cars also advanced.
- The index for finished consumer foods rose 1.4 percent, and prices for finished goods less foods and energy edged up 0.1 percent.
And then there was the good old hedonic adjusment. As SMRA explains:
Each November the BLS includes a report on the average dollar value of quality changes for the new model year for passenger cars and light trucks. The estimate is calculated primarily from information supplied for the October PPI data.
Quality changes can include a variety of improvements such as safety features (for example, brakes, airbags or tire pressure monitors), audio systems, warranty changes, and changes in the level of standard of optional equipment.
These changes can be voluntary or mandated by law, but in either case add something to the average cost of a motor vehicle that is reflected in the PPI components.
There is no predictable pattern to how much quality changes will add to the value of motor vehicles in a model year, nor do passenger cars and light trucks have the same amount or types quality improvements each year. Due to their increased popularity and use as a passenger vehicle, light trucks, minivans, crossovers, and SUVs have generally seen more quality improvements. Upgrades tend to be related to safety, emissions, and comfort as what were once perceived as utility vehicles now serve as family cars. Since 1996, the average amount of quality improvement for passenger cars is about $120, with light trucks at about $201.
Producer prices for passenger cars have been rising more slowly than those for the light trucks category. This is an artefact of the move to motor vehicles other than passenger cars as household transportation. The popularity of SUVs, crossovers, and more traditional light trucks and minivans is reflected in firmer prices and, as noted above, enhancements to make them more like passenger cars.
However, the quality adjustment is only one factor affecting the prices for cars and trucks. Even a substantial increase in the quality adjustment may be more than offset by heavy discounting and big incentives imposed to help sales.
The best news: prices of alcoholic beverages dropped both from September (-0.4%), and a year ago (-0.3%).
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new calculation method = whatever the master algo operator wants
It's called finesse......even a caveman could understand this crap.
Cavemen were actually pretty smart.
Conversely, by historical standards, I think the current population, as a whole, is as dumb as it has been in millions of years.
Likely because cavemen wouldnt tolerate stupid kindly.
"its a poor man who cant outsmart a bear." - caveman
one million years later: " man eaten by bear."
Cavemen (and women) understood the fundamentals because they were not being lied to by their governments. They were out in it to win it. They were the original empiricists.
Only later with the emergence of fake shamen such as economists and politicians, and mass media to publish their false reports, did we lose our way.
Caveman had to invent things, hunt and gather for necessity and not for sport (sport - how stupid).
Modern man plays with his fantasy sports teams and parrots what the rich tell him to think and believe.
So, yeah - caveman>modern man.
Move that goal post.
Atleast oil is super cheap so I can get to the job that I don't have.
https://www.youtube.com/watch?v=DI7pPVJTeSY
yawn....all the rest of the nov/dec econ numbers will be massaged to make up for this oversight
Sorry, I scanned the headline real quick and read it as "Wholesale Inflation Heats Up Due to Jump in CAT Food Costs". Whaa???
Then I read the real reason:
"due to a new calculation for in margins for fuels and lubricants retailing."
Which doesn't make any more sense than a dramatic up-tick in cat food costs.
Well there truly has been a dramatic up-tick in cat food costs. Twice the price for a smaller bag, just like everything else.
Yeah. Granny said the other night she'll have to buy 4 cans of cat food to make our Thanksgiving SOS instead of the usual 3 cans.
Still, the cold is keeping the more affluent scavengers off the roads, so I think I've a good chance of finding some roadkill cat or even coon in time for the holiday.
I know, tell me about it. I just had to switch my mother in law over to Alpo instead of Fancy Feast. Hedonic substitution and all that jazz.
Not a good omen if there is a big enough market for "lubricants retailing" that they keep track of it.
BOHICA
pods
Bending over is about to get a whole lot more expensive, indeed.
I feed my cat a mixture of cat food and WD40. That could explain it.
No, animal lovers, I'm kidding. I let the cats live their own inbred feral lives in the haystack. The kids are NOT allowed to bring the nasty little things into the house. They are NOT allowed to feed them, lest we develop serious galloping cat inflation. We have NO rodent problem here. I think there must be some kind of social commentary in this, but it escapes me.
The message I got is, "Buy more stawks!"
The message is that a well trained cat is better company than people?
They changed the recipe again? John over at shadowstats ain't gonna like that.
<Whatever it takes to obscure and confuse.>
So incompetent that these government hacks couldn't manipulate "inflation" down...
Looks like I am keeping the tractors and trucks a bit longer...
After all it is COLD today
Freezing temps in all 56 states, according to last night's article. Of course, Hawaii's temps were taken inside a freezer owned by some guy named named Saul.
To think that this guy occupies what was once the most powerful orrifice in the world, yet cannot accurately enumerate the number of States in the former United States of Amerika. Was this a teleprompter-less moment? Is he really that retarded? Was the teleprompter active, and are his handlers' minions really that retarded?
This is, supposedly, the best we have to offer?
My sister's cat is smarter, and even with inflation, still eats more cheaply than the 0'bamabots' dogs.
Go look at the tape. He says something like "We've campaigned in all fifty..." and then he pauses because he realizes they haven't been to all fifty states, he mentally computes the three states they haven't been, thinks he's already said the tens digit and finishes with "seven states."
With all the things for which to criticize this traitorous bastard, this ain't one.
Calculate inflation using the formula from the 70's motherfuckers. Go ahead, I triple dog dare you.
You'll shoot your eye out, kid.
Equity value of cardboard box under the interstate = UNCH
but cardboard Lots are runing out under the bridges, you better lock-in today..
The solution seems simple.....hand Wall St banks more free money. Right?
I'm pretty sure they actually just hand it to themselves.
Dude......shhhhh!!!
When using numbers....ALWAYS WORK BACKWARDS !!
I have come to the conclusion that while inflation appears tame and government claims it is low it is growing. The seeds have been planted, and the number of them is somewhat shocking. Inflation lurks beneath the surface and is hidden away in the dark corners of our future.
Want to know where the real cost of things is going, just look at the replacement cost from recent storms and natural disasters. More on this subject in the article below.
http://brucewilds.blogspot.com/2013/06/inflation-lurks-beneath-and-hidden.html
was wholesale cat food higher? grammy wants to know..
Abe could do this in Japan - and just fudge the number to reach 2% inflation. Then Abenomics could declare victory!
Maybe Abe at some point gets Zimbabwe inflation at some point. The Keynesians wet dreams.
Dang LUBRICANTS !!!!!
Who sells Astroglide anyway?
All we need is for the Japanese to have hyperinflation and a loss in faith in the US dollar.
Yellen and the rest of the Fed members can then have all the inflation theses Keynesian PhD hacks ever wished for multiple times over.
Economic redistricting again.
Shouldn`t they (or we) implement a Inflation Spectrum where atlest three
different methods are generaly put forward so that everybody can explain
their imperative on inflation?
The original schizoid mandate for the FED was to maintain low prices and high employment. Of course that was a mindfuck, and no-one at the FED ever really thought they could pull it off, and they never really tried.
But here are the real mindfucks for the FED, the ones that drive Yellen to ambien and baileys milkshakes at 3AM:
Fed mission 1: Maintain inflation while tightening liquidity.
Fed mission 2: Keep Treasury yields below 2% while strengthening the dollar, WHILE ending QE, er, I mean exporting QE to Japan.
Fed mission 3: Keep the stock market pumped up while at the same time, ease the air out of the market so it can operate once again (!) on market forces.
If you can't get an idea of how difficult the FED's job is, imagine yourself eating a partially microwaved bean and cheese burrito from JiffyMart while attending church. The uncomfortable bloating and ominous rumbles from your bowels demand an explosive release, but your mission is to ease out an SBD.
Good luck Janet!
The original schizoid mandate for the FED was to maintain low prices and high employment. Of course that was a mindfuck, and no-one at the FED ever really thought they could pull it off, and they never really tried.
But here are the real mindfucks for the FED, the ones that drive Yellen to ambien and baileys milkshakes at 3AM:
Fed mission 1: Maintain inflation while tightening liquidity.
Fed mission 2: Keep Treasury yields below 2% while strengthening the dollar, WHILE ending QE, er, I mean exporting QE to Japan.
Fed mission 3: Keep the stock market pumped up while at the same time, ease the air out of the market so it can operate once again (!) on market forces.
If you can't get an idea of how difficult the FED's job is, imagine yourself eating a partially microwaved bean and cheese burrito from JiffyMart while attending church. The uncomfortable bloating and ominous rumbles from your bowels demand an explosive release, but your mission is to ease out an SBD.
Good luck Janet!
Zerohedge keeps propagating Keynes propaganda about the communist concept of AGGREGATE DEMAND.
So, much for warring against Keynesianism.
Zerohedge is as keynesians as Krugman, if it continues to focus on the totalitarian 'aggregate demand' propaganda
Let me be clear ekm1, a high standard of living requires a significant amount of real resources and energy. There are now 7+ billion people all competing for a higher standard of living and the remaining resources and available energy. Barring a significant (several billion) decrease int he human population I see plenty of demand.
Exactly my point.
And not enough supply
should`t you consider the 50% to 70% unemployed or non-employable, and the course of little or no value added for most of them, i mean if you`re gonna massively generalise demand!
Rubber sandals, cooking oil, and rice.
That's all wee need anyway, right?
There is no inflation you silly doomers!
So they always change the formula to justify what they want to do ... Yes, they are slime, but they are our slime.
The Fed only needs two calculations; one that downplays when the economy is hot and the other to do the opposite...there, all fixed.