Producer Price Inflation Is Really Pretty Average
There were a lot of reports today like this one from Barron's:
"The Producer Price Index report released by the Labor Department today is the latest sign of rising inflation pressures in the U.S. in early 2011."
The chart above shows the 12-month producer price inflation rates (data here) over the last 11 years from January of 2000 to January 2011. Note the following:
1. Annual producer inflation in January of 3.7% was less than the inflation rates during the first half of 2010, and less than inflation from the fall of 2007 through the end of 2008.
2. The current producer price inflation is about the same as the inflation rate from 2003 through mid-2006, and the same as during 2000.
Bottom Line: Maybe producer price inflation today seems higher than it really is because it's following a period of producer price deflation during most of 2009 (reaching -6.6% in July 2009). But producer price inflation over the last ten months has been pretty normal, and it's not accelerating.