Aussie Macro Moments: Producer prices surge--and consumer component registers huge increase

The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Thursday, April 21, 2011

Producer prices surge--and consumer component registers huge increase

Producer prices rose 1.2% in the quarter (vs. market expectation of 1.0%), to be up 2.9% year-on-year, but the real story is in the consumer component of the producer price index, which one investment bank tells me rose by an incredible 2.4% quarter-on-quarter (yes, that's q/q, not y/y). This is the largest increase in the PPI (c) in the last 10 years or more. Importantly, there is a reasonably good correlation between the consumer share of the PPI and CPI. This thus presents a potential upside risk for next week's inflation numbers...

What is almost as interesting is the significant upstream product price pressures recorded by the PPI, with 'intermediate' product prices rising by +2.4% for the quarter while 'preliminary' prices expanded by an even chunkier +2.6% q/q.

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