Please Note: This is the Producer Price Index (PPI), not the Consumer Price Index (CPI). The Consumer Price Indices (CPI-U, CPI-W, and C-CPI-U) will be published tomorrow, October 19, at 8:30AM EDT. I will have my 2012 COLA Watch up tomorrow night or Thursday.
What is the difference?
The CPI is a measure of the prices that businesses charge consumers. The PPI is a measure of prices that those businesses pay for raw materials that go into the goods they sell to the consumers – in effect, the wholesale cost. The PPI is usually a fair indicator of what the CPI will do.
The September PPI Report
Quotes (in italics) are from the Bureau of Labor Statistics’ news release.
The Producer Price Index for finished goods rose 0.8 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Finished goods prices were unchanged in August and increased 0.2 percent in July.
This is the largest increase in PPI since April.
In September, the increase in the index for finished goods was broad based, with prices for finished energy goods rising 2.3 percent, the index for finished goods less foods and energy moving up 0.2 percent, and prices for finished consumer foods advancing 0.6 percent.
Note that the increase in PPI was described as “broad based.” Everything is going up.
|Month||PPI Incr||CPI-W Incr|
The local radio station business reporter felt that the PPI increase would show up right away in tomorrow’s CPI report.
Based on all this, I am expecting at least a moderate increase in the CPI-W tomorrow. If the increase is 0.4%, which seems entirely possible, this will be enough for a COLA of 3.7%
We’ll all know tomorrow.