Corporate Margin Squeeze Coming As Producer Prices Soar 0.8% On Expectations Of 0.2%

Tyler Durden's picture

Following concerns that China will be unable to funnel liquidity into its slowing economy due to latent inflation, the last thing the world needed was to learn that inflation, in this case Producer Prices, was still running at a blistering pace in the US. Alas, that is precisely what it got after September PPI printed up 0.8% from the month before (following the unchanged print in August) and 6.9% YoY. The number was above even the highest expectation from Wall Street strategists (consensus was 0.2%). And while PPI ex food and energy was up just 0.2%, try telling that to those 99% of the population whose income is barely sufficient to buy the, you guessed it, food and energy, which rose by 0.6% and 2.3% respectively. The biggest concern is the immediate impact on margins: producers’ rising costs likely to lead to further margin shrinkage “as firms choose to absorb increasing costs rather than pass them along to consumers,” says Bloomberg economist Joseph Brusuelas. Don't expect much respite in the CPI report to follow shortly.

Some amusing observations:

Finished foods:  Prices for finished consumer foods climbed 0.6 percent in September, the fourth consecutive monthly increase. Accounting for over eighty percent of the September advance, prices for fresh and dry vegetables increased 10.0 percent.


Intermediate foods:  The index for intermediate foods and feeds climbed 0.9 percent in September, the fourth straight advance. A 3.2-percent increase in prices for prepared animal feeds accounted for over eighty percent of the September rise in the intermediate foods index.


Crude foods:  The index for crude foodstuffs and feedstuffs fell 0.9 percent in September. From June to September, prices for crude foods moved up 2.9 percent following a 1.4-percent increase for the 3-month period ending in June. A major factor in the September monthly decrease was a 7.4-percent decline in the fluid milk index. Lower prices for slaughter hogs also contributed to the crude foods decrease.

Much more in the source.

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oogs66's picture

transitory bitchez :)

Dr. Richard Head's picture

Targeted inflation is the m.o. of the Federal Reserve.  Too bad the target is everyone's sphincter. 

BrocilyBeef's picture

What do we all have in common? Why do we all flock here?

Snidley Whipsnae's picture

Must be good news ... DJ futures down only 11


Ruffcut's picture

I'm pissed. My beer went up a buck. I can't drink any cheaper swamp piss than busch light. DAMN YOU BENNY!

duo's picture

I've pretty much gave up beer drinking.  When Old Milwaukee and Schlitz are $6 a six-pack (up from $3 two years ago) it's time.

Wine, on the other hand, is about the same price as it was 3-4 years ago.  Most vinyards are privatly owned and source grapes from local co-ops, most breweries are corporations that have to buy grains from the CME/COMEX and must feed an army of parasitic executives.  Hmmmmm

DormRoom's picture

global stagflation, from input costs, cost push inflation, from commodity bubble, from ETF financializing commodities.  leverage ETFs cause price distortion using future options mechanism, and misallocation of capital.  future adjustments, after ETF liquidity collapses, destroy markets.


case study: natural gas & UNG (ETF)

SheepDog-One's picture

What happened to all the bulls lecturing us 'poor, hapless bears' I miss them and I hope theyre OK these days. All that fattened up dumb Kobe bull beef on the barbie I bet Wall St is enjoying it.

HelluvaEngineer's picture

They're getting juiced up, ready to sky the market at the opening bell!

dwdollar's picture

They are quietly waiting through the next few days so they can come back and say "I told you so" or "I sold at the high why didn't you?" depending on the outcome.

scatterbrains's picture

but will the Berstank hit the print button while inflation is still only running at 8% ? I'm thinking he better hurry before we get up into the high teens.. it will be much harder for him to justify at that point.

SheepDog-One's picture

Bernanke whiffed a 3 at-bats to print....Europe threatened to print and ones printing anymore, printing fools no one.

scatterbrains's picture

but I-pod prices are unchanged, whew!  I almost panicked for a minute there.

SheepDog-One's picture

YEA no doubt! ITune downloads still .99 cents.....WHEW no inflation in what matters!!

Snidley Whipsnae's picture

They are still printing US Ts out their azz... Creating more debt and throwing it into the super black hole... From one hole to another, do not pass go, do nothing to help the Main St economy or create jobs.

Go OWS! Send some members to occupy DC! Catch carp from the reflecting pool and fry them in front of the Fed! Eat every damn thing in DC that is edible! Er, you can't eat gold but they don't have anything but paper. Bring some live stock to eat the grass and shrubs. Make a statement the azz hats won't soon forget.

YesWeKahn's picture

There is no inflation, trust me, my name is Bernanke.

Irish66's picture

Can't we give stragegists a proper name?

Open to ideas.

TradingJoe's picture

Me think they desperately whish to print but they need higher dollar and lower PMs and Markets! Eh?!

SheepDog-One's picture

Who is that supposed to fool anymore? 

ArkansasAngie's picture

When you start messing with people's bread ... things get serious.

Bernanke's cake is getting stale and green is transitioning to black as mold flourishes.

QE3+++ is going to result in riots.

Washington ... you had better decide real quick whose side you are on.

SheepDog-One's picture

There will be no QE3, false flag attacks will result in riots and WW3 is kicking off in Iran....prepare accordingly.

MachoMan's picture

Are you serious?  How many bullets have to whiz by your head to determine the people on the other end of the gun barrels have chosen the other side?  How many decades have to go by where law after law is passed against the best interests (long term) of the nation before your suspicions start to arouse?  How many times do we have to "vote the bums out" before we decide that it is the entire process that needs revision, not just its practitioners?  [for a recent example, see democrats' wins in the mid 2000s under the rally cry of bringing the troops home...  still waiting on that one...  or where we elect an anonymous figurehead solely on the basis that he promises change (without really contemplating what change exactly)...  still waiting on that one too].

Some rats will jump ship...  others will play on the deck as the ship sinks.  Tis just the nature of rats.  Ultimately, we make the system, whether by being proactive or by apathy.

tmosley's picture

When did milk prices go down.  They were just as high as ever last time I bought some.

SheepDog-One's picture

You didnt catch that? There again milk prices just went down....back up again. Just have to be THAT fast!

jdelano's picture

as I said a few days ago---> trading range.  We kissed the top and now all headlines will service the plunge back down to 1100.  If it happens by Friday, expect the next installment of EFSF snakeoil to launch another rally back up, though the risk of a breakout to the downside on this round is greater.   

HelluvaEngineer's picture

Yep.  I'll be taking half off the table if we get back down there, although this sucker is way overdue for cracking to the downside.

devo's picture

Isn't it more likely that producers will use hidden inflation (i.e. shrinking the size of their goods yet charging the same price) rather than take margin hits or pass the cost (ppi) in real price?

Most Americans will not realize if a box of Cheerios is .8% smaller...

JohnG's picture

They have been for months.

junkyardjack's picture

Well no more margin stories, let's hear about growth 

firstdivision's picture

This is bullish.....for inflation/food/energy/metals. 

Caviar Emptor's picture

Biflation, bitchez. Biflation

devo's picture

I'm surprised gold is down so much given this data.

SheepDog-One's picture

Nothings shocking, and we havent seen anything will markets react when they set off a nice little tactical nuke on Occupy I wonder? That will be some morning I bet.

ArkansasAngie's picture

The FX market is the easiest market for the Fed to manipulate.

jbc77's picture

With all the ggod news this morning complete with awesome earnings reports it's easy to see why the futures are recovering and looking to open green. Even BAC is trading up in pre-market. Now that the sarcasim is out of the way - what the fuck is going on with this broken ass market? Slew of horrible news and futures recover? WTF?? How the fuck do you trade this broken market? Good news is bad and bad news is good?

SheepDog-One's picture

Trade it? Oh I got far clear of this joke a while ago.

jdelano's picture

lol--just saw that myself.  Another screwball pitch--inflation bad for dollar, good for equities....oh yeah, and lest we forget Apple is going to singlehandedly employ all of China's indigent peasents and everyone at OWS.    This day just got more interesting/complicated.  

Caviar Emptor's picture

If you want a better picture of biflation to come: 

UK CPI up to blistering 5.2% reported this morning, just as UK GDP hit 0.1%


Lotsa luck!

apberusdisvet's picture

The funeral for Keynesianism has been delayed until Bernanke gets out of rehab; meanwhile the corpse is rotting.

Caviar Emptor's picture

And the Trifecta Biflationary news roundup for this morning would not be compete without China: 

China CPI 6.1% as GDP growth slows to 9.1%


Perfect trifecta: US, UK, China all the same pattern: CPI UP! GDP DOWN! 


Lotsa Luck

SheepDog-One's picture

No need to worry about markets, theyre dead, trading at 1999 levels. These markets are the most irrelevant thing around today.

lizzy36's picture


Twenty years of stagnating wages, highest unemployment rate in almost 30 years, and +6.9% Y/Y PPI.

Gasoline alone up almost 30% y/y.

Anyone (here's looking at you Charlie Evans) that says what US really needs is controlled higher inflation, doesn't understand how a march or #OWS turns into a revolution.

Macroeconomis really has FUCKED UP the world.

Gief Gold Plox's picture

"The planet's fine, the People are fucked" --George Carlin

Sutton's picture

Just as Ben was astonished by the housing collapse, he is going to be shocked by rip roaring consumer prices.

Depose him now.

dcb's picture

Tyler, you just don't understand the economics. this is good for the economy (according to bernanke) by increasing inflation it will cause people to spend instead of save. Of course this is wrong, but since it doesn't fir to justify their insane monetary poicy it won't happen.

MFL8240's picture

And Gold and Silver are down?  This is about as insane as it comes.

spanish inquisition's picture

The baton is about to be passed. When the oldsters talk about penny candy and feeling rich holding a nickle. You can tell kids "There use to be a place you could go and everything on a special menu was only a dollar"

blindfaith's picture

“as firms choose to absorb increasing costs rather than pass them along to consumers,” Is this a joke? That may be true for the micro and very small businessman, but not corporate america which is still feeding on 401K contributions, they simply put less in and charge the same as before.

10 pounds of potatoes is now 8 for the same price, that is a20% increase.

One pound is now 12 ounces, same price, this is 25% increase.

Numbers in fraction ounces and odd numbers of grams, so easy to stand and caculate at the store.

The only thing I see cheaper now is