We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, (sic) promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America. Preamble to the Constitution
The Producer Price Index (PPI) for final demand rose 0.7 percent in August up from 0.4 in July. The goods component rose 2.0 percent and services increased only 0.2 percent. The index ex food, energy, and trade services rose 0.3 percent. For the past year this index rose 3.0 percent.
As with the CPI gasoline (20 percent hike) and other fuel prices jumped markedly in August.
Nevertheless, in reporting the PPI the media did not report the Intermediate Price Indexes, which is comprised of processed goods (up 2.1 percent), unprocessed goods (up 1.3 percent) and services, up only 0.1 percent.
In addition, the BLS also calculates price indexes for Intermediate Demand by Stages of Production. The four stages detail the price dynamics of goods flowing through the US production structure.
Prices in the four stages increased from 0.6 to 1.6 percent. This implies if these early-stage price hikes are passed along the way consumer price inflation may accelerate in coming in future months.
In the meantime, today’s WSJ front page article headline says it all, “Higher Fuel Costs Put Dent in Corporate Profits.” (The linked article has a different title)
Higher input costs wreck havoc with business planning. (See my boom-bust linked below.). Business decision makers have a tough enough time figuring out demand for their products as consumer tastes and preferences may shift, however marginally, which could turn profits into losses if entrepreneurs are not nimble to see these changes.
Add easy money, quantitative easing or any other name for money printing and business planning becomes problematic. In short, money printing is “poison” for the economy. Money printing causes price inflation virtually across the board, eventually causing interest rates to increase and squeezing business profits, thus reducing capital investment.
In short, the Federal Reserve sucks for workers and sustainable prosperity.
The solution: either ending the Fed or passing a law preventing the Fed from creating money out of thin air and manipulating interest rates. Let’s see if any of the GOP presidential candidates articulate the real threat to the American people’s prosperity at next week’s debate.
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My latest piece on the economy was published in Fortune, https://fortune.com/2023/03/27/ -2023-layoffs-tech-finance-unemployment-outlook-fed-rates-murray-sabrin/ This is an update of my 2021 forecast, https://fortune.com/2021/12/09/next-recession-heres-everything-bubble-markets-2021-2022-covid-murray-sabrin/
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Murray Sabrin, PhD, is emeritus professor of finance, Ramapo College of New Jersey. Dr. Sabrin is considered a “public intellectual” for writing about the economy in scholarly and popular publications. His new book, The Finance of Health Care: Wellness and Innovative Approaches to Employee Medical Insurance (Business Expert Press, Oct. 24, 2022), and his other BEP publication, Navigating the Boom/Bust Cycle: An Entrepreneur’s Survival Guide (October 2021), provides decision makers with tools needed to help manage their businesses during the business cycle. Sabrin's autobiography, From Immigrant to Public Intellectual: An American Story, was published in November, 2022.