The government released a nasty little inflation rate surprise yesterday. Prices increased .4% in January, which was 33.3% higher than the expected .3% increase. It should come as no surprise to anyone who fills up at a gas station or shops in a grocery store that prices are on a tear.
The Bureau of Labor Statistics (BLS) report said, “Increases in indexes for energy commodities and for food accounted for over two thirds of the all items increase. The indexes for gasoline and fuel oil both increased in January, continuing their recent strong upward trend. The index for food at home posted its largest increase in over two years with all six major grocery store food group indexes rising.”
According to the latest report from economist John Williams at Shadowstats.com, consumer prices in January rose to 9.1% annually if inflation was computed the way BLS did it in 1980. ( Shadowstats.com methodology strips all accounting gimmicks out of the equation.) Consumer prices (CPI) are not the only thing rising. According to Shadowstats.com, producer prices (PPI) are also staging steep increases. Williams says, “The monthly PPI finished goods increase reflected the Fed’s dollar-debasement-induced upside pressures on gasoline prices, although subdued reporting of food inflation continued to run counter to anecdotal evidence of Fed-induced spikes there. The 0.5% “core” PPI inflation rate for January (up from an unrevised 0.2% in December) also was an upside surprise for the markets, as the effects of higher oil prices spread into broader areas of economic activity.”
To offset the bad news on inflation, retail sales gains reported this week seem to show consumers are still keeping the economy going. Here’s the way it was reported at Marketwatch.com, “Sales at U.S. retail stores rose in January for the seventh straight month, but the increase was the lowest since last summer, government data showed Tuesday. . . .Retailers’ sales rose 0.3% last month as consumers spent more on gasoline, autos and online goods, the Commerce Department reported. It was the smallest increase since last July, however.” As I have been warning, this is the government’s distorted way of reporting inflation as growth. In reality, there was no increase in sales at all last month. Inflation in prices of .4% more than cancels out .3% sales growth. This is clearly a setback for the economy and not a step forward...
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