The BLS released their latest inflation reports this week for CPI and PPI and I have been looking over the data. Yahoo Finance has a nice chart here that shows where the most deflation has occurred over the past month.
Two things have caught my attention.
FOOD
According to the Consumer Price Inflation report food prices have gone down (see chart below).
Great news right? Well, now take a look at the Producer Price Index report for FOODS category that came out a day after.
The cost of producing food has continued to climb so if food at the grocery store is cheaper and the cost of producing foods is higher, someone somewhere is eating the cost (for now). It is easy to see that these two things are on a collision course and ultimately food prices will rise again.
If you’re struggling with food right now, it may be a great time to stock up on canned and dry goods because I suspect prices will rocket back up despite all the applauding of the drop in inflation.
Services
The cost of services continues to climb so expect to pay more for virtually any service you need from getting a haircut to plumbing to dry cleaning.
The Yahoo Finance chart shows deflation in furniture, rental cars, gasoline and used vehicles so if you’re in the market for those things, it may be a good time to buy. I’m not in the market for anything at the moment but I may stock up on canned goods for the winter if prices come down further. I already have stock piled rice & beans and other dry goods so I’m good there.
The Fed meets next week and many people expect a cut in the Fed funds rates which, in my opinion, will likely trigger a new round of inflation or at the very least, stop the downward trajectory of inflation.
You can find the CPI and PPI inflation charts by clicking the links respectively.