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Wholesale prices on the rise

Heidi Moore Aug 17, 2011

Wholesale prices on the rise

Heidi Moore Aug 17, 2011

Kai Ryssdal: There is the small matter of where exactly this economy’s going. It’s a tricky thing to measure, but that doesn’t stop anyone from trying. Two big inflation indicators come out this week. The consumer price index, which is tomorrow, and the producer price index today.

This morning, we learned wholesale prices — the PPI — rose at their fastest clip in six months. So is that good? Bad? What would we like to see that’ll let us feel the economy’s actually on the mend?

Our New York bureau chief Heidi Moore has that story.

Heidi Moore: After the apocalyptic market tsunami freakout panic of last week, a lot of us are still disoriented. What just happened? Where are we?

Today, we have our first economic indicator that has been released since then. The prices companies paid for their raw materials rose 7 percent in July compared with a year ago.

Milton Ezrati is a partner at Lord Abbett, an investment firm in New Jersey. He says the price index is jumping way too fast.

Milton Ezrati: Obviously, if costs rise, living standards fall.

Food prices drove the index up this time. It’s getting more expensive for companies to produce the food we eat. That’s why Uncle Sam stepped up this week with the Great Chicken Bailout. The government paid $40 million to buy the chicken that Americans are dropping from their shopping lists. It will give it to soup kitchens.

Keep in mind, this price index measures the past, not the future. And the government thinks food prices are too unstable to use when it measures inflation.

Mike Mandel: At this point, I would not consider the direction of prices to be a signal at all about the recovery.

That skeptical voice is Mike Mandel. He’s the chief economic strategist at the Progressive Policy Institute. He says we should just accept that prices are going to go up for consumers and businesses alike. Inflation is inevitable. A recovery isn’t.

Mandel: It’s possible for prices to go up even if the U.S. economy has not recovered.

Tomorrow, the consumer price index will come out to help round out the picture. We may get another clue then.

In New York, I’m Heidi Moore for Marketplace.

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