Core Commodity Price Inflation Was Zero in March and April

Alan ReynoldsThe Producer Price Index (PPI)is not a  measure of inflation in the cost of living. It estimates pricesbusinesses receive, not prices consumers pay. Importantly, it includes soaringexport prices for U.S. on food and energy, which had already risen 4.5% in the month of March, 3% in February, and 2.8% in January due to sudden global scarcity in the wake of the Russian war and sanctions.The PPI “increased 0.5 percent in April…[partly because] construction increased 4.0 percent, whileprices for final demand services were unchanged. ” “The indexes for final demand trade services and for final demand services less trade, transportation and warehousing declined 0.5 percent and 0.1% respectively. (Trade measures changes in [profit] margins received by wholesalers and retailers.”To repeat, the PPI is not a  measure of inflation. It includes profit margins in retailing and wholesaling,prices foreigners paid for U.S. grain and LNG, plus other irrelevant miscellany. It does try to estimate some service prices, from the firm ’s perspective, but excludes housing and other key services which are properly included in the CPI.Put the PPI aside and take a  closer look at commodities and services in the April CPI. Commenting on recent differences between inflation in goods and services,Jason Furman (former chairman of President Obama ’s CEA) recently offered some unique insights:“This is the inflation story to worry about: core services inflation has increased fo...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs