Posted by: Michael Mandel on August 19
Yes, I know the headlines say “Wholesale prices rising at fastest pace since 1981.” That’s from Associated Press. All the other online news service—CNN, the NYT, Reuters, Bloomberg—have roughly the same take on this morning’s PPI numbers. I’m sure that BW.com has picked up at least one of these reports as well.
But frankly, the inflation-scaremongers are living in the 1950s. The PPI number that they are reporting consists only of goods, in an economy increasingly dominated by services. And services inflation is falling, not accelerating. Here’s the chart, which shows year over year change in the producer prices for the service sector.
This is where the real action is happening. In fact, there is a squeeze on prices going on, not an acceleration in inflation.
(traditional service industries include everything from healthcare to information to finance to accomodations. They do not include retailing and wholesaling, or transportation).
[Changed title of post as of 3PM]
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.