Who says government drones don’t have a sense of humor? Even though wholesale prices surged by 0.7% in one month, the government actually reported that food prices fell. I bet that is making you choke on your can of cat food you are eating because you can’t afford human food anymore. But, even using the badly flawed and manipulated government numbers, wholesale inflation is running at an annualized rate of 12% over the last three months. This means that companies have two choices: 1) eat the increase in their costs and reduce their profits by 12% or 2) pass the 12% increase onto you by either increasing the price or reducing the size of their products. Which do you think they are doing?
And oh yeah, unemployment claims surged back above 400,000 this week. We are two years into a supposed recovery and unemployment claims are higher than they were during the 2001 – 2002 recession. CNBC says it’s the best time to buy stocks.
Can you say – DOUBLE DIP RECESSION?
U.S. wholesale prices rise 0.7% in March
By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — U.S. wholesale prices rose sharply in March, spurred once again by higher gasoline costs, but food prices fell for the first time in seven months.
The core rate, which excludes the volatile food and energy categories, rose 0.3% in March. Higher prices for light trucks accounted for a large chunk of the increase.
Economists surveyed by MarketWatch had predicted a 0.8% increase in overall producer prices and a 0.2% increase in the core rate.
Investors and the Federal Reserve usually view the core index as a better gauge of inflationary pressure because it excludes food and energy, prices of which often fluctuate.
Yet the sharp and steady increase in food and energy costs could pose a threat to a fragile U.S. recovery, economists warn. Demand for many other consumer goods and services — the linchpin of economic growth — usually fall when people have to spend more money on basic necessities.
Over the past year, wholesale prices have jumped 5.8%, stoking concerns about higher inflation. Other price indicators have also flashed warning signs.
If wholesale prices keep rising, however, companies eventually will have pass along more of their costs to their customers.
The wholesale report provides “further evidence that recent gains in oil and commodity prices are putting upward pressure on a goods prices beyond energy and food,” economist Peter Newland of Barclays Capital said in an email.
The spike in wholesale prices has largely been driven by a surge in petroleum. Energy costs rose 2.6% in March, and they’ve shot up 17.6% over the past 12 months.
Higher gasoline prices, which jumped 5.7%, drove most of the increase.
Wholesale food prices fell 0.2% in March – the first decline since last August — one month after posting the biggest gain since 1974. A 21.4% drop in the price of fresh and dry vegetables accounted for the decrease.
Still, the price for food paid by producers has risen 4.4% over the past year.
Also in the wholesale report, the price index for intermediate goods rose 1.5% in March. Core intermediate prices excluding food and energy, viewed as a leading indicator of inflation, jumped 0.9%.
Intermediate products are items such as flour, processed from wheat, before it is made into bread.
In the week ending April 9, the advance figure for seasonally adjusted initial claims was 412,000, an increase of 27,000 from the previous week’s revised figure of 385,000. The 4-week moving average was 395,750, an increase of 5,500 from the previous week’s revised average of 390,250.