Producer Pricing Report Shows the Recovery is Slowing

By October 14, 2010Economy

Following an identical increase in August, the Labor Department reported today that producer prices rose by 0.4 percent in September. The strong rise in prices last month was from a 1.2 percent increase in finished food prices, where accelerations in the prices for meat more than offset a huge decline in the price of eggs, likely from ongoing fears regarding the possibility of a salmonella outbreak.  Importantly prices of core finished goods, which exclude food and energy, edged up just 0.1 percent for the third time in the past four months.  This signals that producers continue to have modest pricing power due in part to a slowing domestic recovery.   Slower demand is also having an impact on manufacturing pricing power, which on a year-over-year basis increased by 6.8 percent in March and has now slowed to just 4.1 percent in September. This is the slowest pace since December and another concerning signal that the economic recovery is losing steam.

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