"Core" Producer Prices rise more than forecast!

Posted by Andrew at 5/21/2008 7:29 AM
Categories: America, Economics, China
From Bloomberg.com:

May 20 (Bloomberg) -- Prices paid to U.S. producers, excluding food and fuel, rose twice as much as forecast in April, tightening the profit squeeze as a slowing economy makes it tough for companies to pass on higher costs to consumers.

The Labor Department said today in Washington that so- called core prices increased 0.4 percent from March, bringing the year-on-year gain to 3 percent, the biggest since December 1991. An unexpected drop in energy costs and unchanged food expenses held the total price measure to a 0.2 percent gain from March.

``If you have a relatively gloomy outlook for consumer- spending growth going forward, as we do, that will limit how much of these cost pressures can be passed through,'' :S:d1">Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts, said in an interview with Bloomberg Television.

Rising prices for metals and chemicals, propelled by the global commodity boom as demand from China rises, contributed to the increase in wholesale charges last month. At the same time, government figures show that consumer prices rose less than forecast as households reined in spending in the aftermath of sinking home values and declines in payrolls.
.....
“We certainly expect further price pressures to come through,'' said Kenneth Broux, a financial markets economist at Lloyds TSB in London. “Inflation expectations are becoming more entrenched and that is something the Federal Reserve is keen to avoid. Rates have bottomed out in the U.S. and the next move is likely to be up in early 2009.''

The price report and other financial news led the market lower as a realization that MAYBE the economy has not hit bottom yet! 

Stay Tuned ... as I said before, I will be teaching Macroeconomics in the fall too!
 

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