Food and fuel keep rising, but talking heads say all is well
The Producer Price Index (PPI) keeps rising, almost entirely because of increasing food and fuel expenses. Why are economists telling us not to worry?
The Bureau of Labor Statistics reported today that the Producer Price Index (PPI) rose .4% last month. This inflation is exactly what Austrians would expect to result from Helicopter Ben running his dollar-printing presses at full speed.
Though everyone who buys things should be concerned about this inflation in finished goods, the talking heads on CNBC and other news outlets are telling everyone to pay no attention to that man behind the curtain. They tell us that we shouldn’t be concerned about inflation because if one excludes food and energy, inflation of finished goods is a measly .1 percent. Economists and journalists refer to the PPI without food and energy as the “core PPI” and assure the public that the core number is much more important than the overall PPI. This is true–so long as you aren’t one of those people who eats food or uses fuels to heat your home or commute.
Take a look at this story from MarketWatch.
“It remains very, very difficult to believe the Fed should be concerned about inflation in the economy (in the aggregate) when the tools they use to measure inflation continue to suggest a very moderate pace of price appreciation with the prospect of further declines more generally.”
Food prices rose 1.2% in September. The price of meat climbed 5.2%, accounting for two-thirds of the increase in the food category. Prices for dry and fresh vegetables also rose, and the cost of processed young chickens saw the biggest one-month increase since 2006.
Energy costs, meanwhile, increased 0.5% as natural gas prices ticked higher. This category is driven mainly by changes in price of natural gas for home heating and gasoline for motor vehicles.
Producer prices have risen 4.0% over the past 12 months on an unadjusted basis, but the core rate has grown at a much slower 1.6% pace.
So we are not supposed to worry about inflation because most of the inflation came from meat (5.2% last month) and gasoline (6.1 % last month)? They conveniently neglect to mention that a significant portion of household expenditures are on food and energy. They also neglect to point out that lower income households spend proportionately more of their income on food and energy than do higher income households. This means that the poor are hit the hardest by the inflation categories that “experts” tell us we should ignore.
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