Producer Price Inflation Lowest in a Year; For Finished Goods, 0% Over the Last Four Months
1. The annual inflation rate for crude goods (including crude energy materials and crude foodstuffs and feedstuffs) fell to 4.5% in January, the lowest rate in more than two years, since a 4.8% rate in November 2009. As recently as June 2011, inflation for crude goods was more than 26% (see chart).
2. The annual inflation for intermediate goods fell to 4.2% in January, the lowest rate since December 2009, and down from a recent high of 11.5% in July (see chart). On a monthly basis, the prices for intermediate goods have fallen or remained flat for five out of the last six months.
3. Producer price inflation for finished goods fell to 4.1% in January on an annual basis, the lowest rate in a year, since a 3.6% inflation rate in January 2011 (see chart). The annual inflation rate for finished goods reached a three-year high of 7.1% last July, and has fallen in five out of the last six months since then. On a monthly basis, prices for finished goods have fallen in two out of the last four months. The price index for finished goods in January 2012 at 193.5 was slightly below the index level in September 2011 of 193.6, so there has been a very slightly downward pressure on prices for finished goods over the last quarter.
Bottom Line: At the producer level, there don't appear to be any inflationary pressures; and in fact, the trend in annual inflation for crude and intermediate goods has been generally downward for the last several years, which will likely translate into lower inflation for finished goods over the next several months.
Update: The chart below shows that the price index for finished goods (seasonally adjusted) has been flat for the last five months, with an inflation rate of 0% since September.