PPI: Smoking (AGAIN)

by Karl Denninger, Market Ticker:

Oh my look what we have here!

The Producer Price Index for final demand increased 0.8 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 0.4 percent in April and 1.6 percent in March. (See table A.) On an unadjusted basis, final demand prices moved up 10.8 percent for the 12 months ended in May.

So…. two points, more or less, higher than CPI.  PPI leads, I remind you, so the consumer inflation level has not peaked.

Let’s look inside.

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Final demand goods: The index for final demand goods moved up 1.4 percent in May, the fifth consecutive rise. Over 70 percent of the increase in May can be traced to a 5.0-percent advance in prices for final demand energy. The index for final demand goods less foods and energy moved up 0.7 percent, while prices for final demand foods were unchanged.

Oh really?  Only 5% eh?  Well, don’t look at June, because gasoline, for example, has risen by more than 10% in the last two weeks which is all in June.  Oops.

Product detail: Nearly 30 percent of the May increase in the index for final demand services can be attributed to prices for truck transportation of freight, which rose 2.9 percent.

No kidding?  You mean $6+ diesel fuel turns directly into higher shipping prices?  I just got back from a cross-country trip and saw lots of dead dinosaurs coming out of the stack of 18 wheelers and every one of them had better keep moving or you’re not eating, never mind being able to buy and consume anything else.  The current Administration’s war on fossil fuels might make you feel good but it is also directly responsible for this insanity.  Choose one and only one: Feel good or be able to afford food and basically everything else.

The really nasty is that the 12 month trend is unbroken and, as I noted, it all started right after Biden was inaugurated.  He said he was going to do this during the campaign and he has.  It takes time for the PPI to reflect down into the final shelf price and it has.  But the 12 month final demand number, less food, energy and trade from 12 months prior stands at 6% which it has run at or above since August of last year.

Shut it off now and it will be next summer before that has all worked its way through and there’s nothing you can do about the time requirement.

What’s even worse is this table, which portends an inflationary detonation of your pocketbook:

That is catastrophic.  Note that the right-most column is wildly above the left — by about double — and has been for the entire last year.  While productivity can absorb some of that the fact remains that unprocessed goods are turned into processed ones and then finally into the above table.  This is a direct result of both the Trump and Biden Administration policies — Trump first with wildly insane money printing and then Biden with not only doubling down on that but in addition declaring war on energy.  Do not for one second think this resides only in the executive; it does not.  In point of fact it is Congress that is primarily responsible for all of it and both sides of the aisle are equally to blame.  Make sure you provide proper thanks to your Congress critter and Suckators for screwing you blind.

Of course that would be redundant since the American people demanded all of it, so for one we get what we demanded.

Trade and transportation have not shown any slowdown either — not that it much matters with the goods and services side generally.

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