Tuesday, December 15, 2009

PPI and Inflation

The PPI today showed an annualized rate of increase in excess of 16%. In the above data, through November, we see the growing increases over the last two quarters in the PPI despite the downward pressure on the consumer. The PPI is a leading indicator of inflation and portends latent inflation which we have been anticipating on the other side of this recession due to the actions of the current Administration.

The Financial Times states:

"US stocks failed to break into positive territory after a surprise jump in the producer price index sparked inflation concerns. Disappointing manufacturing data from the state of New York also gave investors another reason to pause after Monday’s rally."

This we believe will be the first step in seeing a potential inflationary trend moving into 2010 creating a stagflation situation reminiscent of the past.