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Generational Dynamics Web Log for 18-Oct-04
The Producer Price Index continued its near-deflationary path in September

Web Log - October, 2004

The Producer Price Index continued its near-deflationary path in September

The PPI, which measures wholesale prices, increased by 0.1% in September.

The "core index," which excludes food and energy items, increased by 0.3%. Both figures had fallen in August.

For months, analysts have been predicting increasing inflation, based on economic models that were developed since the 1970s. However, longer term models are required to understand why inflation has been falling recently, despite very low interest rates and very high oil prices.

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 Sept
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI                .6    .1   .6   .7   .7  -.3   .1  -.1   .1
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI "Core index"   .3   -.1   .3   .1   .4   .2   .1  -.1   .3
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI                .5    .3   .5   .2   .6   .3  -.1   .1  n/a
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI "Core index"   .2    .2   .4   .3   .2   .1   .1   .1  n/a
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----

The September Consumer Price Index (retail prices) will be available later this month.

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. (18-Oct-04) Permanent Link
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