Inflation Liftoff

The government released a nasty little inflation rate surprise yesterday. Prices increased .4% in January, which was 25% higher than the expected .3% increase. It should come as no surprise to anyone who fills up at a gas station or shops in a grocery store that prices are on a tear.

The Bureau of Labor Statistics (BLS) report said, “Increases in indexes for energy commodities and for food accounted for over two thirds of the all items increase. The indexes for gasoline and fuel oil both increased in January, continuing their recent strong upward trend. The index for food at home posted its largest increase in over two years with all six major grocery store food group indexes rising.” (Click here for the complete report from BLS.)

Consumer prices (CPI) are not the only thing rising. According to the latest report from economist John Williams at Shadowstats.com, producer prices (PPI) are also staging steep increases. Williams says, “The monthly PPI finished goods increase reflected the Fed’s dollar-debasement-induced upside pressures on gasoline prices, although subdued reporting of food inflation continued to run counter to anecdotal evidence of Fed-induced spikes there. The 0.5% “core” PPI inflation rate for January (up from an unrevised 0.2% in December) also was an upside surprise for the markets, as the effects of higher oil prices spread into broader areas of economic activity.”

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