For some, this decrease could be interpreted as a preventive measure against inflation, as Bloomberg reported this morning. Wholesale prices last declined in December 2008, by 1.8 percent.

Measured by the producer price index, wholesale prices serve as one of three gauges of inflation calculated monthly by the Bureau of Labor Statistics.

Rapidly declining energy prices led the overall decrease, as the costs of both gasoline and home heating oil each declined by 13 percent.

On the other hand, the prices of finished goods sans food and energy had increased by 0.1 percent, following a 0.4 percent increase in February.

Prices of women, girls and infants’ apparel fell slightly in March, after a 1.5 percent increase the month before. Prices of toys and consumer plastic products fell less than they had in February, while prices of sporting and athletic goods rose by 0.6 percent after a 3.5 percent decline.

The Bureau of Labor Statistics reported the rise yesterday through its regular tracking of wholesale prices of crude, intermediate and finished goods, cumulatively referred to as the producer price index.

Finance and economics journalist James Picerno called the price increase paired with the 22 percent rise in new housing starts “more than just a dead cat bounce.”

“Is it safe to declare the deflation risk over? No, not yet, but it’s not too soon to start thinking about the light at the end of the tunnel, dim though it’s likely for the time being,” he wrote in his blog, The Capital Spectator.

Prices of finished consumer goods sans food and energy rose by 0.4 percent, following the 0.3 percent increase observed in January.

Within this category, prices of both household appliances and women’s, girls’ and infants’ apparel rose by 1.5 percent after smaller increases during the previous month. Meanwhile, prices of sporting goods and toys experienced the steepest declines, of 1.7 and 3.5 percent respectively.

On the Ground Below

The Bureau of Labor Statistics, National Retail Federation, and Census Bureau released reports indicating that wholesalers and retailers are still adjusting to the economic climate, as price indexes continued to fall:

• Retail container traffic fell in November for the 16th month in a row. With this finding in mind, the National Retail Federation maintains its hypothesis that 2008 will be the slowest year for traffic since 2004, with a year-to-year decline of 7.1 percent.

• U.S. wholesalers lowered their inventories by 1.1. percent in October, though sales also dropped by 4.1 percent from the previous month, according to a Census Bureau report released Wednesday.

• As reported today, wholesale prices of finished goods dropped by 2.2 percent in November, following monthly declines of 2.8 and 0.4 percents.

The Cloud of Consumer Pessimism

As these prices fell, a few research groups found record retail sale declines last month. The International Council of Shopping Centers even deemed Black Friday and the following weekend’s shopping days a “poor start to the holiday season sales,” as it observed a year-to-year decline of 2.7 percent.

The cause of these sales declines: a hibernating consumer, hiding from any temptations to spend money this holiday season:

• The ABC News Consumer Comfort Index measured record-low levels of confidence for the fifth week in a row, as reported on Tuesday. According to the poll, 92 percent of consumers surveyed said the nation’s economy is in bad shape, while 79 percent of them rated today’s buying climate negatively.

• Perhaps as a result, shopping ranked second only to dining out as one of the top activities consumers planned to decrease, according to a poll by the National Association of Television Program Executives and E-Poll Market Research. About 35 percent of consumers also said they planned to stay local more in their socializing, if not at home. They may also hesitate to buy any gifts full price this holiday season – though they were also willing to splurge on themselves, as Women’s Wear Daily reported.

Attempts to Find a Silver Lining

Meanwhile, researchers are taking such economic and behavioral conditions in mind, in trying to find positive news within it all.

• Some, like MasterCard’s SpendingPulse, traced the origins of rising consumer pessimism back to the ongoing depreciation of petroleum, as wholesale prices for it and petroleum products dropped by 11.2 percent last month.
  The research group reported yesterday a 3.8 percent decrease in total retail sales, excluding auto purchases – the biggest month-to-month decline it has ever measured. The caveat: without the rapid decline of gasoline purchases factored in, retail sales growth would have otherwise remained relatively flat.

• In its latest study, the Kauffman Foundation posed to question whether recessions were a good time to start a new business.
  The study, examining entrepreneurship up till 1975, did not reveal anything too conclusive, as the research group found a number of other factors that had to be considered. The research group also acknowledged that potential entrepreneurs would be unwilling to leave their jobs to found companies during recessionary periods.
  However, when the study excluded the Great Depression and World War II – the most unusual periods of time – the Kaufmann Foundation found that slightly more companies debuted during recession periods than expansion periods.

Overall, this week’s numbers showed that consumer pessimism remains persistent as retailers and wholesalers continued adjusting to the economic environment. Whether such feelings or downturn behavior will fade first, time has yet to tell. But either way, as the next few weeks pass by, and as the new year approaches, new perspectives could perhaps lead to new solutions – or, at the very least, a break in the cloud.

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.”

In order to make sure that you are covering all the costs involved in calculating the wholesale price for your items, be sure to take each of these costs into consideration.

Materials – This one seems obvious at first: the materials you buy to make the item. However, there’s more. If you are using paint, glue, string, thread, etc. then you need to account for the portion of that material that you use. For instance, if a bottle of glue costs $2.00 and you use 1/4 of the bottle to make your item, then you would add $0.25 for glue to the materials list.

Labor – You will first need to figure out your wage. Maybe your wage will be $8 an hour, or maybe $20. That will be up to you. In order to figure out your labor cost for making a particular item, you will need to figure out how long it takes you to not only make the item, but how long it takes you to order materials, create your designs and any other office work. All of your time spend on each time should be factored in. Take the total amount of time spent on an item and then multiply that by your wage.

Overhead and advertising – These are things that are directly related to your business, like the advertising of your website, internet access, business phone calls, electricity for your office, etc. After you have figured out the total costs that are business related, then it’s time to figure out what portion is directly attributable to each product. If your monthly business overhead is $100 and you make 100 identical items per month than $1 of overhead should go into the cost of each item.

Transportation – If you are having materials shipped to you, then the shipping costs need to be figured out per product. If the materials you ordered are enough to make 100 items, then divide the shipping cost by 100. If, instead, you are driving to pick up your materials, then figure in $48.5 cents (the amount the IRS uses for deductions) per mile into your transportation costs.

Equipment depreciation – All equipment eventually wears out and then must be replaced. Estimate how many years your equipment (like a sewing machine or saw, for example) will last and then divide the cost of the equipment by the number of years it will last. That number is the cost per year. Then, divide the cost per year by the number of hours you plan to work in a year. That number is the cost of using that equipment for each item for an hour. Multiply that by the number of hours you use the equipment to make one item. That number is your depreciation cost per item.

Once you have all your various costs figured out, then add them all together and that number is your wholesale cost. Typically, the retail cost on handmade items is double the wholesale price, so that will be a good mark-up for any retailers that you plan on selling your items to.