It’s not just about food and energy, and that makes it all the more worrisome.
Core wholesale prices, which is to say ignoring food and energy prices, are now running at their highest annual pace since the early 1990s, as our chart below shows. Through April 2008, core producer prices rose by 3.0% for the year, the highest since December 1991.
And yet the Labor Department yesterday reported that producer prices overall advanced by a relatively mild 0.2% in April, down considerably from March’s soaring 1.1% rise. On first glance, that looks encouraging. So, what’s the problem?
The short answer is that inflation at the wholesale level is spreading into the broader economy. Indeed, although top-line wholesale prices rose just 0.2% last month, core wholesale prices jumped at twice that pace, or 0.4%.
This should come as no surprise to those who’ve been following wholesale prices in recent months. Back in February, your editor noted that the trend in core PPI looked threatening, and the threat has only grown since then.