Inflation Twitches, Blinks Eyes…

The Producer Price Index for Finished Goods rose 1.8 percent in June, the Labor Department reports. That's a big step up from a 0.2 percent increase in May and a 0.3 percent increase in April. 

But it's not enough to qualify as inflation to Bernard Baumohl of the Economic Outlook Group. "We're experiencing deflation still," Baumohl tells The New York Times. "That's largely because U.S. and international economies are so very weak."

Jon C. Ogg of 247wallst.com gave a closely argued pre-release writeup on the PPI:

Because oil was much higher and because the bias through much of June was still bullish in oil, tomorrow's figure could be a false alarm for the inflation hawks.  If that number comes in much lighter then expected, then it is going to give the inflation hawks even less of a basis for all the fears that prices were heading through the roof any time soon.  The big rise in oil was in May when prices at the end of April went from the mid-$50's up into the $70's by June.  As there is a lag on that, we won't be shocked if a higher number on the headline PPI is the result.  But the trend in oil rigs is already contracting again, and that does not lend much credibility to the notion of suddenly higher oil prices nor that of a sudden return of demand.

Another notion to consider is that, even with a one-week figure of sub-600K job losses, the shrinking confidence of CEOs, shrinking consumer expectations, and a growing unemployment will continue to offset all that hypothetical new printed money for some time.

The PPI increase came in at about double expectations after that was written.

In other infation-indicator news, retail sales increased at an anemic 0.6% May to June. That leaves retail sales down 9.6% from June 2008. A Calculated Risk graph puts that figure into grim context.

Housekeeping note: I write with the bias that everybody in the Fed, Treasury and the White House is trying to spark inflation like Jack London trying to get a fire started by burning pages from Das Kapital. So in fairness, I should note that they always say they aren't pursuing per se pro-inflation policies.

That said, be on the lookout in coming days for these numbers to be vaguely alluded to as Rays of Hope or described in some similar term of vagueness. (I'm fairly sure "green shoots" has been retired to punchline status. Might I suggest "financial fungi" or "pecuniary peatmoss" as a replacement?)