INDICATOR: November Producer Price Index
KEY DATA: PPI: -0.1%; Excluding Food and Energy: +0.1%
IN A NUTSHELL: "With import and wholesale prices going nowhere, inflation is likely to remain tame for quite a while."
WHAT IT MEANS: There are many out there that are saying it is time for the Fed to stop coming to the aid of the economy at such an aggressive pace by slowing the quantitative easing program. They have two fears: Inflation and damage to markets. Let's start with fear of inflation. It is irrational. Global businesses are not looking to increase prices; they want to expand markets. Consequently, as we saw yesterday, import prices have been largely flat over the past few months and are down over the year. A similar pattern exists for wholesale costs. In November, the Producer Price Index fell for the third consecutive month and even excluding volatile food and energy, costs barely budged. Finished consumer goods prices were down. A few food products, such as eggs, pork and unfortunately confectionary products did post solid gains but overall, food prices were down. Other than a rise in tires, no consumer good category posted a sharp gain. There was a similar lack of pricing pressure when it came to business products. In other words, consumer inflation will not be rising in the near term because wholesale goods costs are going up. Looking into the future, the situation looks even better as most intermediate and raw materials prices were either largely flat or down.