Wholesale Price Inflation Is Slowing as Economy Worsens
The US Bureau of Labor Statistics released new Producer Price Index (PPI) data on Wednesday, and it looks like the rate of increase in price inflation is slowing. Nonetheless, year-over-year price inflation in December remained near 40-year highs, and shows the marketplace is still dealing with the nearly six-trillion-dollar surge in the money supply that took place during 2020 and 2021.
The PPI is a measure of prices at the production phase of goods and services. Prior to 1978, the index was known as the Wholesale Price Index.
In December, year-over-year PPI growth came in at 6.2 percent which was a 21-month low. The PPI had most recently peaked in March of 2022 at 11.6 percent. December’s print was a (seasonally-adjusted) drop of 0.8 percent, month, over month. According to this measure, it does indeed seem that price inflation is slowing.
Of course, if we look at the index overall, and not just at rates of increase, we find wholesale prices are up 17 percent from where they were in early 2020. This generally reflects a similar trend in the CPI index which is up about 15 percent over the same period. Notably, the 17-percent increase in wholesale prices also outpaces the increase in the Dow which is up 14 percent over the same period.
At appears both workers and businesses need growth of 15 percent or more during this period just to keep up with consumer prices, and 17 percent or more to keep up with wholesale prices. These numbers also belie the popular narrative on the Left that consumer prices are only rising because of “greedflation” or corporate greed. By that narrative, inflation is fueled by sellers arbitrarily marking up their prices to exploit workers and consumers. Yet, if growth in wholesale prices is similar to consumer price growth, it’s hard to see how sellers are enjoying a windfall from rising prices. Rather, one could interpret this is a matter of sellers attempting to keep up with their own rising costs.
So why are PPI prices slowing now? There’s good reason to believe it reflects a slowing economy. Indeed, the economic data pointing toward a slowing economy and recessions continues to pile up. December’s Leading Ec