PPI Time

Producer Price Index figures now due.

July was 1.2% which scared everybody. I think that the chances are that it will be lower than that.

Update 12.31GMT
A fall of 0.9%

Update 12.46GMT
Year-on-year PPI was still high at 9.6%. Last month it was 9.8% and the month before it was 9.2%. The last time the PPI fell was in December 2007 with a fall of 0.5%.

In terms of how the PPI has fared in the last six months, there were some rather considerable increases throughout 2008 Q1 and 2008 Q2. This drop reflects a sudden decrease in demand and is, I believe, a recessionary indicator.

I think that the CPI will probably remain at over 5% (p.a.) for the next 2-3 months despite the recession, simply because there is still too much inflation in the system that has to be taken out. Real interest rates are still negative and oil prices need to drop 50% or more to below $50 per barrel to have any effect on inflation, and that aint going to happen.

So, predictions:

  • 2008 Q3 GDP will be clearly in the negative. I would say at least -1.0% or worse.

  • September unemployment will increase to between 6.4% and 6.7%.

  • The NBER will announce a recession date. This announcement will be made sometime before the end of October and will probably be dated from 2007 Q4.

Direct Download of PPI release here (pdf, 209.3kb)

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