Wholesale Inflation at 13%, Food Inflation at 18%

Thanks for visiting. This blog is intended for individuals with Net Annual Income of $105,000 or more. Get Rich Slow + Get Rich Quick = Get Rich Slick. If you're new here, you may want to subscribe to my RSS feed.

It’s funny how AP & Yahoo sugar coat things sometimes. I saw the headline, “Retail Sales Soar in September” but when you read the article there is some shocking information to be found, ”

The 1.1 percent rise in wholesale inflation, which followed a 1.4 percent drop in August, was more than double what economists had been expecting.

The big increase was driven by a 4.1 percent surge in energy prices in September, including an 8.4 percent jump in gasoline costs, the biggest rise for gasoline prices since March. Food costs surged by 1.5 percent.

Do the math. A 1.1% rise in wholesale inflation translates into 13.2% ANNUAL INFLATION! And a 1.5% rise in food costs translates into 18% ANNUALIZED INFLATION!

So which is more important, “Retail Sales Soar in September” or “Inflation up 13% & 18% ?”

So are you happy that Helicopter Ben lowered rates and the market rallied a little bit? Well, you’ll be paying dearly for it everyday.

Bookmark to:

Hide Sites

5 Responses to “ Wholesale Inflation at 13%, Food Inflation at 18% ”

Comments:

Brandon says:
October 12th, 2007 at 1:10 pm

I think you need to reconsider your highlighting:

The 1.1 percent rise in wholesale inflation, which followed a 1.4 percent drop in August, was more than double what economists had been expecting.

I think you need to look at trends at a whole rather than focusing on ONE MONTH. Using the chart on this article as reference we see that wholesale prices have risen approximately 3.4% through September rather than the 9.9% your analysis would predict.

Of course, my analysis is a little off because I simply added and subtracted the percentages when in fact each percentage is based upon the value of the prior month. I am not a statistics expert, but I think that if we account for that from the base price at the beginning of the year we will get an inflaction of 3.42%.

As we can see looking at late last year’s numbers that appear to the left of the graph, there is no necessary correlation between the way a month will go two consecutive years, but if for the sake of argument we assume the last three months will go as the first 9 have on average, this will lead to a yearly inflation of about 4.56% in wholesale prices… much better than your 13.2% number.

RichSlick says:
October 12th, 2007 at 1:18 pm

Thanks for the comment Brandon but it’s not bad analysis. When inflation is reported as having jumped 1.5% for food, you need to understand that this is ADJUSTED inflation and not the nominal inflation rate as it used to be calculated.

Since you’re evidently new here you haven’t read these posts talking about how inflation measuring has changed over the years.

http://www.shadowstats.com/cgi-bin/sgs?

Using non-adjusted inflation rates from the site above, inflation is running at about 6% but even those non-adjusted numbers were a bit funny to begin with. There is a search box on this blog. Type inflation and catch up. You might learn something.

Not a statistican or economist, but an actuary says:
October 12th, 2007 at 4:04 pm

I headed to the website linked in the Yahoo article and used the following link to retrieve more data points. http://data.bls.gov/cgi-bin/surveymost?wp

Based on data from the following series:
Finished goods - WPUSOP3000
Finished consumer foods - WPUSOP3110
Finished goods less foods and energy - WPUSOP3500

No matter how I’ve diced it so far I cannot attain a double digit annual inflation you mentioned.

RichSlick says:
October 12th, 2007 at 6:34 pm

Here are a couple of quotes,
http://www.thestreet.com/s/double-digits-be-prepared-for-rate-hikes/funds/saving-money/10381213.html?puc=_googlen?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA

Low interest rates are a good thing for those with credit card debt or variable-interest-rate mortgages. But if recent comments by former Fed Chairman Alan Greenspan are any indication, these latest interest rate moves may very well be the calm before the storm.

Greenspan said that globalization kept inflation under control by keeping wages low while he was in charge of the Fed, but that effect can’t last. Developing countries like China will see price pressures and higher wages, as the flow of people into the work force from farms to factories begins to slow.

These inflationary trends will have a global impact. Eventually, Greenspan believes that consumers should expect double-digit interest rates — something the U.S. hasn’t seen since the 1980s.

Greenspan isn’t alone in this opinion. While inflation isn’t as much of a concern to the Fed over the short term as confidence in the market due to the subprime mortgage problems, other economists believe that inflation will be a concern for the Fed over a five-year period.

http://www.time.com/time/magazine/article/0,9171,1670255,00.html

Of course, BLS is mostly BS in my opinion.

Get Rich Slick