Unfortunately, the upward trend is continuing unabated.  The “producer price index” is essentially the tracking of wholesale prices at three stages: Origination (commodity), Intermediate (processing), and then Final (to wholesale).  Today, the Bureau of Labor and Statistics (BLS) released December price data [Available Here] showing a dramatic 9.7% increase year-over-year in Final Demand products at the wholesale level.

I’m not going to beat this dead horse {Go Deep Here}, except to point out a few even larger warning signs that are evident.    Suffice to say, despite the spin likely from defenders of the White House occupant, the inflation impact is continuing exactly as we would expect.

The monthly price increase was 0.2% which would under normal circumstances give the impression that price pressure for the month was lower than previous.  However, there’s a key component clouding the problem.

As noted by the BLS, “A major factor in the December decrease in prices for final demand goods was the index for gasoline, which moved down 6.1 percent.” Gas prices momentarily dropped in the December capture of pricing; this has skewed the data considerably.  As a consequence, the energy costs measured in December looked like they dropped 3.3 percent.

You are well aware that gasoline has jumped back up in price in the past few weeks.  Additionally, total energy costs to you have not dropped at all.  In the background of this momentary skew, the costs of final demand goods after the energy impact rose .04% in December.

The momentary drop in gasoline and diesel fuel in December gives an artificial outcome in the data for all three stages.   Oil prices are back on the climb, and the prices of the goods and services overall to consumers have not reflected any decrease; factually they have increased even more.

The White House will likely claim this result is showing a positive trend.  However, if you take away the temporary gasoline price drop, that claim evaporates quickly.

I have modified Table B on “Intermediate Demand” to take out the noise and show the impact of the heavily weighted energy cost.

The prices of intermediate demand goods, both processed and unprocessed, appear to be going down. However, that appearance is only created by the temporary weight of energy cost decreases, which are heavily weighted on gasoline costs.

Processed goods showing year-over-year inflation in December of 24.4% at the intermediate level, and unprocessed goods showing year-over-year inflation of 38.0%.   However, both of those numbers are heavily impacted by the false sense of security from the temporary gas price drop.

All of that said, the scale of price inflation, what we are actually feeling in our checkbooks and bank accounts, is well represented by inflation rates at 25 to 40 percent.  Those rates of inflation are factually what we are witnessing at the grocery and hardware store.

FUBAR.

Prepare your affairs accordingly…

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