Service PPI and core PPI spikes.

To Wolfrichter for Wolf Street..

According to the Bureau of Labor Statistics, the producer price index for final demand surged 1.4% from February to March and 11.2% from a year ago, both the largest and worst year-on-year surges. today. After staying at around 10% for four consecutive months, producer price inflation occurred – to use stock trading terminology.

PPI Final Demand tracks the input price of the consumer industry, where selling prices will rise in the coming months. Consumer Price Index, where WHOOSH has already reached 8.5% yesterday.. The final demand for PPIs shows what lies ahead for future CPIs. And there is no “softening” in stores, and it is the service PPI that is currently starting to skyrocket.

Over the last 15 months, producer prices have risen constantly. Double-digit producer price Inflation in a row of five months is pretty much something. And today’s breakout is noteworthy.

Without volatile food and energy costs, core PPI would have risen 1.0% from February to March, up 9.2% year-on-year. This is the highest in the data and has been constantly rising since late 2020.

And service! The producer price index for end-of-life services rose 0.9% from February to March, up 8.7% year-on-year. This is the highest value in the data dating back to 2010.

Companies across the supply chain understand that increased costs can be passed on to the next company and consumer. And consumers are playing hard and have switched to paying anything from fairly wise buyers and priced shoppers. This is the concept of inflation that we have inherited.

This idea of ​​inflation suddenly blossomed and blossomed due to two unprecedented enormous factors.

• The Fed’s reckless monetary policy of interest rate restraints and $ 4.8 trillion in money printing has caused huge asset price inflation and the resulting outbursts.
• The government has spread $ 5 trillion in debt throughout the country in just 24 months.

Under this flood of funds, leading to the most grotesquely overstimulated economy ever, prices are no longer important and everyone understands it.

Price increases move across the economy in uneven waves, the cost of some goods and services soars, the cost of other goods and services may stabilize or fall, 1-2 months Later, the prices of other commodities and services soar in the game of inflation-A-Mole.

And companies understand that not only can they pass on higher costs, but they can also pass on far more than the additional costs, hidden behind the idea of ​​inflation that is currently blooming, leading to huge fat margins.

Companies always charge the highest possible price, but are constrained only by the desire to reach their sales goals. As customer price resistance begins, companies will consider whether to withdraw those price increases to stimulate volume or continue to increase prices until certain limits are reached. For online purchases, this equation is currently being continuously recalculated in real time.

What has changed compared to 2019 is that buyers have become infected with the idea of ​​inflation and are now willing to pay anything instead of pushing it back. The rebound will curb inflation, thereby curbing broader inflation. But that backlash is now being shattered by consumers throughout the supply chain. The overall pricing dynamics have loosened.

I’ve seen the ceiling start to hit Used cars with a 40% surge in prices and increased buyer resistance, And industry-wide sales are currently declining, despite abundant supply. However, other products and services have not yet met the buyer’s resistance. And even if the price of one product hits resistance, the price of another product collapses.

And these double-digit rises in producer prices indicate that even higher inflation is heading towards consumers, either because they are no longer able to do it, or because they are no longer willing to do so. It will continue to do so until consumers start pushing back. Pay anything. That never happens, and these trillions of dollars are still floating around states, local governments, businesses and consumers, and they will be spent, but the spending is from goods to services.

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