The August Producer Price Index — measuring inflation upstream from consumers — brought a mixed update on the economy one day after the Consumer Price Index showed inflation continuing to increase despite President Joe Biden and Democrats' insistence that their "Build Back Better" policies are providing price relief to Americans.
PPI's top line data showed a decrease of 0.1 percent on final demand in August — still sitting at 8.7 percent in the last 12 months. Meanwhile core PPI for final demand — mirroring the latest CPI read — increased 0.2 percent in August, double the previous month's advance, and 5.6 percent in the last year. That increase in core PPI shows that the inflationary pressures Democrats wishfully said had already peaked... haven't.
That's because August's slight dip in the main PPI read, according to the Bureau of Labor Statistics, "can be traced to a 6.0-percent drop in prices for final demand energy" as fuel prices come down from their all-time highs reached earlier in the summer.
As our friend Ed Morrissey notes at HotAir, the slight easing seen in August's PPI due to reduced fuel costs is only to be a temporary phenomenon:
Almost every category of goods still has prices going up with gas and food out of the calculation. The problem with that is that gas prices are likely to start going up, as Janet Yellen warned over the weekend. The switch from summer formulations will cause an organic price blip on its own, but there are other interventions and lack thereof to consider as well. The G-7 plans to impose a new sanctions regime to force Russian oil off the market without any additional supply to replace it. At the same time, the drain off of the Strategic Petroleum Reserve will have to end soon and the oil replaced to allow for the strategic use of the SPR.
Even with the month-on-month drop, the year-on-year for final demand on goods remains in double digits at 12%. Inflation’s not over in the PPI index, not unless gas keeps declining — and without a lot more supply, that’s not going to happen.
Gas prices aren't going to continue trending the way they have forever, and when they tick back up, inflation is going to jump back up again because the inflationary pressure on other goods continues to increase — ignored by the Biden administration — covered only by energy decreases that will prove fleeting as supply limitations fail to hold prices down.
When looking at commodities, claims that inflation as a whole has peaked are debunked. Prepared animal feeds are up 1.2 percent, unprocessed goods for intermediate demand jumped 5.7 percent in August — the biggest jump since February — and 36.1 percent in the last 12 months, while unprocessed energy materials advanced 13.5 percent. Processed goods for intermediate demand — while down slightly in August — remain up 14.1 percent over the last year.
While Democrats and the White House are sure to herald Wednesday's PPI report — why wouldn't they after celebrating the falsely named "Inflation Reduction Act" on the day consumer inflation was shown to be increasing (again) — they can't mask the reality that prices are continuing to increase despite aggressive Fed action already. Even if Democrats are able to save face through November's midterms, the pain is sure to continue into 2023, especially as the Federal Reserve promises their attempts to tame inflation will bring more hardship for American families.