How bad is inflation?

Printable Version | [eMail this article!] |

I just came across an interesting article by Dan Spillane - US Inflation Index 'Missing', but Alternates Show Giant Jumps (Scoop 3/10/04). The release of the Producer Price Index has been indefinitely delayed (U.S. Blames Aging Computers for PPI Delay, Reuters 3/08/04).

The January PPI, which measures prices paid to farms, factories and refineries, was originally scheduled for release on Feb. 19. The February report was due to be released this coming Friday.

The nearly three-week delay for the January report is unheard of in the government's statistics system. Some economists said they miss the wholesale price data, in part because it can offer early clues on profits and, by extension, hiring. (Reuters)

Spillane states:

The loss of the PPI data comes at an unfortunate time. In testimony, Alan Greenspan recently suggested that the type of inflation measured by the PPI was only temporarily suppressed due to 'hedging' activities. Moreover, measures similar to the missing PPI, which also measure inflation at the production level, have shown a marked rise lately. For example, the Journal of Commerce index shows an inflation rate of over 40 percent. (2) Likewise, a second index, the " ISM prices paid component" showed a jump in inflation which hasn't been seen since immediately before recent bond and stock market crashes.

The disappearance of the PPI figures also comes after a December report by Citizens for Corporate Accountability, which noted "juggling" of math related to energy prices, that resulted in a lower December PPI.

The JOC - ECRI Industrial Price Index (an alternative to the PPI) Shows an increase of 41.80% annual change - Industrial Price Index 3/10/04 - with an increase of 108.5 for the past month, and 88.9 for the past 12 months. This is not a good sign for an "improving" economy.

On 3/10, I posted a short piece Lying with statistics that argued that one way to manipulate data is to change what one is counting. The suppression of the PPI is a different twist entirely and falls into the pattern of the supression of information that has become characteristic of the Bush administration.

Interestingly, the reason given by the BLS for the indefinite suspension of the data is that they are doing a "massive" reclassification of the industry categorization system and that their aging computers can't handle it. One has to wonder if this "reclassification" is tied in any way to Bush wanting to reclassify service sector jobs as manufacturing jobs (since job losses have been heaviest in the manufacturing sector). One also has to wonder whether the aging computers is a real issue as Spillane notes that other BLS departments are not having these problems.

The indefinite suspension of the PPI comes at an interesting time.
- US continuing job loses and outsourcing are in the news.

- Greenspan (and most economists) are giving grim deficit news while Bush claims to reduce that deficit by 50% over the next 5 years.

- President Bush and company are trying to paint rosy economic and job pictures.

- It is an election year.

I'm sure that the indefinite delay of the PPI is totally coincidental. It is unfortunate that one of the key predictors of future inflation, corporate profits, and hiring, happens at a time when the Administration is trying to bolster a weak area for the President's campaign - the economy.

An interesting addition is the new polling figures which show that public sentiment is increasingly that Bush is not doing a good job, or taking the US in the right direction (57%) for both (GOP learns Bush, gasp, is the problem, Houston Chronicle 3/9/04)

Posted by rowan at March 10, 2004 06:13 AM | TrackBack | Printable Version | [eMail this article!] |