Wholesale Prices Still Dropping After 27-Year High
by Christina Lee on October 21st, 2008
Wholesale prices dropped for the second month in a row after reaching the highest annual rate in 27 years, according to a U.S. Department of Labor report.
Prices fell by 0.4 percent in September, following a 0.9 percent decrease the previous month. They are still 8.7 percent higher than they were in September 2007, as the Bureau of Labor Statistics reported last week.
The two-month drop in wholesale prices – collectively referred to as the producer price index – follows a 1.2 percent month-to-month increase and a 9.8 percent rise from July 2007, that being the sharpest increase since a 10.4 percent jump in June 1981.
Energy prices continued to decline as well, by a total of 7.5 percent over the past two months. While this has helped ease economists worrying about inflation, they cannot claim overall financial stability with the current state of wholesale prices.
Without food and energy prices factored in, the producer price index of finished wholesale goods still rose by 0.4 percent in September – a “good news, bad news story” as stated by Peter Morici, University of Maryland international business professor and Seeking Alpha contributor.
“That indicates that we have yet to see moderation in what businesses charge at a wholesale level,” he said in a phone interview.
Some wholesale prices of finished goods – including that of women’s, girls’ and infants’ apparel; plus office and store machines and equipment – fell after rising in August. But the prices of finished consumer foods continued to increase by 0.2 percent, after rising 0.3 percent in August. Those declines also accompany a 15.4 percent rise in prices of intermediate goods as received by manufacturers, according to the report.
And while those producers may have noted a change in their prices, consumers did not see much change at all. In fact, the consumer price index, or the change in prices as seen by households, was “virtually unchanged in September,” after just a 0.1 percent decrease in August, the Bureau stated. This follows a 1.1 percent overall rise in June, which included a 3.8 percent increase in transportation prices and a 6.6 percent increase in energy prices.
Morici had predicted for September a 0.2 percent decline. Now he expects more of the same moderate pricing in the future – “more tepid increases, or maybe decreases in wholesale prices through the end of the year.”