JEREMY HOBSON: Well here in the U.S. the government said this morning that wholesale prices rose by just two-tenths of one percent last month. In the past year, though, the so-called producer price index is up by more than 7 percent. That’s a measure of prices of the things companies buy. Tomorrow we’ll hear about prices of the things consumers buy.
Let’s bring in our regular Tuesday analyst Juli Niemann from Smith Moore and Company. She’s with us live from St. Louis. Good morning Juli.
JULI NIEMANN: Good morning Jeremy.
HOBSON: Well put the two stories together for us. Rising prices in China, rising prices in the U.S., there aren’t any protests here in America as far as I know going on over rising prices, but how are these two things related?
NIEMANN: Well, that’s the big thing because the rising food in China leads to civil unrest. Here in the United States we’re sullen but not rebellious, is what it really comes down to. China has really decided to reduce social tensions by cooling inflation, but not hurting growth. Here in the United States, Ben Bernanke is taking the opposite approach. We have no inflation. We only need to work on growth and credit expansion. Except that the real inflation is a tax on consumers and that’s in our cash inflation. It’s very real. It’s food, energy, building supplies, pharmaceuticals and services. And this is where we’re really seeing the pinch and it’s really become a class issue — low and middle class.
HOBSON: Well when it comes to consumers as you say, I mean we heard this morning that retail sales actually fell last month in this country by two-tenths of a percent. Is that related to rising prices do you think?
NIEMANN: It’s actually a short-term thing. We had a very brief respite from rising food prices — summer veggies are back in. Then we had a little bit of a drop in retail sales in terms of automotive, you know. And again that’s tied to Japan. But these are temporary things that we’re looking at. What we are going to see is — toward the end of the summer — a significant pick up in the price of energy. That’s global demand for energy. Not what’s driving here in the United States but it’s going to hit us right here at home. And virtually everything through the production line.
HOBSON: Juli Niemann, analyst with Smith Moore and Co. in St. Louis, thanks as always.
NIEMANN: You bet.
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