14 May 2009

Deflation Picks Up Speed

The following appeared in today's edition of "The Journal of Commerce".

Prices paid to producers of finished goods in April shifted up slightly from the previous month after widespread declines. But compared with a year ago, the trend since December has been increasingly downward.

The Producer Price Index for Finished Goods increased 0.3 percent in April, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported May 14. This rise followed a 1.2-percent decline in March and a 0.1-percent increase in February.

However, compared with a year earlier the index was down 3.7 percent. That was the strongest downturn in five consecutive months of year-over-year deflation.
In December, wholesale prices were down 0.9 percent; January’s prices fell 1 percent; in February, prices were down 1.3 percent; in March, prices dived 3.5 percent compared with the previous March.

Most of the deflation can be attributed to falling oil prices. From April 2008 to April 2009, the finished energy goods index moved down 25.6 percent. By contrast, prices for finished goods less foods and energy advanced 3.4 percent and the index for finished consumer foods increased 0.2 percent.