Bending the Third Rail
Because We Should, We Can, We Do
Tuesday, August 15, 2006
Happy Days!
The stock market is rallying today on news that the PPI (the producer price index) fell by .3%, the first such decrease in quite a long time. The market sheep are thrilled! No inflation!

Nevermind that the PPI doesn't include energy or food ... minor details. But it also turns out that there is more to the story:
The drop in Car and Truck prices accounts for nearly the entire decline in the core PPI.

Prices for oil and other materials continue to rise; WSJ noted that "Deeper in the production pipeline, prices increased. Prices of raw materials, also known as crude goods, rose by 3.1% in July after declining 1.7% in June. Intermediate goods prices increased 0.5% after climbing 0.7% in June."

Prices of metals and chemicals continued to rise. These price increases include a 4.8% rise in energy materials, and a 1.3% gain in prices of industrial materials.
Let's also not forget that the upcoming CPI (consumer price index) includes costs to rent as the component of "housing". Guess what rents have been doing lately with housing purchases falling?

It will be interesting to see the market reaction when the news sinks in.
Written at 10:19 AM by Greyhair.
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