Time may be running out for the policy of embracing the Great Liquidity without paying an inflationary price. A hint of things to come is buried in today’s producer price report for November.
Wholesale prices jumped 1.8% last month, the Bureau of Labor Statistics reported this morning. That’s near the upper range for monthly changes in recent years. The surge last month is easily dismissed, however, considering that much of the rise is due to energy prices. On the assumption that energy prices won’t keep rising, one could soft pedal the headline PPI number for November.
It’s harder to dismiss last month’s core PPI change, which excludes the volatile food and energy sectors. As our chart below shows, core PPI gained a hefty 0.5% in November, the highest monthly change in more than a year.
Is simply a case of statistical noise? Or is pricing pressure finally starting to rebubble as the financial crisis of 2008 continues to fade into history? Another clue arrives in tomorrow’s consumer price report.