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Wholesale Inflation - Energy And Cars Taketh Away And Giveth Back

In September and October, energy prices at the wholesale level fell. In November, they rose. In October, motor vehicle prices at the wholesale level fell. In November, they rose. In September and October, seasonally-adjusted wholesale prices at the finished goods level fell 1.3% and 1.6%, respectively. In November, these prices rose 2.0%. Even with the latest month's increase, the November level of the finished goods PPI remains below the April level. Looking at producer price changes on a year-over-year basis in order to separate the signal from the noise, the chart below suggests that cyclical peak for finished goods inflation occurred back in September 2005 and for intermediate goods inflation in October 2005. At less than 1% year-over-year, finished goods PPI inflation in November hardly looks threatening. As an aside, at the consumer goods level, Circuit City's disappointing latest quarterly earnings report suggests that there might be a whiff of deflation in the air. From flat screen TVs to the McMansions to watch them in, prices are falling absolutely. And the sellers of these products are not making it up on volume. Are the big-box retailers and home builders following in the footsteps of the Big Three auto producers?

 

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