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The PPI, which measures wholesale prices, fell 0.1% in August. Economists had expected a 0.2% increase. The PPI, which measures wholesale prices, fell 0.1% in August. Economists had expected a 0.2% increase.
The "core index," which excludes food and energy items, also fell 0.1%, while economists had expected an increase of 0.1%.
The Consumer Price Index (CPI), which measures retail prices, fell 0.1% in July. August CPI figures are not yet available.
Even though pundits and high-priced analysts have been talking about nothing else besides inflation, the fact is that the rate of inflation has been falling dramatically since May, indicating a period of increasing deflation.
The following table shows the values of the PPI and CPI for each month so far in 2004:
Changes from preceding month
2004
Jan. Feb. Mar. Apr. May June July Aug
----------------- ---- ---- ---- ---- ---- ---- ---- ----
PPI .6 .1 .6 .7 .7 -.3 .1 -.1
----------------- ---- ---- ---- ---- ---- ---- ---- ----
PPI "Core index" .3 -.1 .3 .1 .4 .2 .1 -.1
----------------- ---- ---- ---- ---- ---- ---- ---- ----
----------------- ---- ---- ---- ---- ---- ---- ---- ----
CPI .5 .3 .5 .2 .6 .3 -.1 n/a
----------------- ---- ---- ---- ---- ---- ---- ---- ----
CPI "Core index" .2 .2 .4 .3 .2 .1 .1 n/a
----------------- ---- ---- ---- ---- ---- ---- ---- ----
It was the May figures, which appeared to indicate an inflationary trend, that convinced the Fed and Alan Greenspan to increase interest rates for the last two months. The next interest rate decision day for the Fed will be on September 21. Opinion seems to be split on whether the Fed will further increase interest rates then.
As we've previously said, if you
look at long-term trends instead of just a few months, we're actually
in a long-term deflationary period. We actually expect prices to
fall by 30% in the next few years.
(10-Sept-04)
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