April PPI Cost Pass Through
For stressed out consumers rising food prices can't be considered a good thing.
Let's take a look at the April PPI and see if there are any trends in what costs are being passed up the chain and what costs are not. Costs are color coded to help spot the trends.
- PPI except Food and Energy is in Blue
- Food is in Green
- Changes vs. 12 months ago are in Red
- Overall month to month PPI is in Pink
- Energy is untouched
Intermediate and Crude Goods
Finished Goods PPI
Focusing on the three month trend of PPI except food and energy (Blue Boxes) one can see huge increases in the cost of raw materials (crude goods) of which only 1/4 or so is reflected in intermediate goods and virtually none in finished goods. Pricing pressure is non-existent.
Focusing on the annual rate of change (Red Boxes) we see about 1/3 of the costs making their way from the crude goods level to the intermediate PPI level and almost all of that being passed on from the intermediate to the final. What prices got passed on? The answer can be found in food.
The Green Boxes (food) show a significant portion of costs being passed on and the final results (magenta) for the finished PPI seem strong correlated to food.
I am still in the camp that says food is a bargain but I have to admit that I am finally seeing prices rise in the grocery stores I shop at. Sale prices on meat are still good but non-sale prices have been inching up and in particular on fresh vegetables. For stressed out consumers rising food prices can't be considered a good thing.
In "Five Things" today, Professor Kevin Depew posted an interesting chart on the annual rate of growth of PPI Crude Foodstuffs and Feedstuffs. If you haven't seen it yet, check it out. Foodstuff is soaring. Outside of food and energy, however, there has been little passthru. But gasoline prices alone are causing some anguish and now we can add food and jobs to the picture. That is a bad mix for sure.
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