The PPI

Producer Price Index News Release text
AUGUST 17, 2005
http://bls.gov/news.release/ppi.nr0.htm

The year over year percentage increases tell the entire story:

the finished goods index increased 4.6 percent
finished energy goods advanced 15.2 percent
The index for intermediate goods climbed 6.5 percent
prices received by crude goods producers rose 8.4 percent

Inflation resides in these numbers, and must eventually be reflected in the Consumer Price Index. One might ask why it does not show up now. The Answer is: Because We are too busy running American businesses out of Business. We utilize cheap World Production centers to undercut domestic Production facilities, creating almost complete Price Inelasticity for their Products, so rising Costs grind them into bankruptcy or folding. Their elimination suppresses the PPI readings of associated Production materials:

Prices for materials for durable manufacturing decreased 0.9 percent in July, following a 0.5-percent decline in the prior month

June and July remain the most productive months of the Year. A decline during these months can be translated into a definition of a shrinking market. This reduced market comes from loss of Productive capacity, not from cheaper Mining and Milling Costs or greater productivity:

In July, the Producer Price Index for Total Mining Industries was 194.1 (December 1984=100), 24.7 percent above its year-ago level.

A Price rise of this magnitude means functionally that Production Costs have not gone down, and that the Mining Industries will rationally maintain full employment of Production capacity. The lowering of Prices at this Stage means the total Market is shrinking in volume by loss of Participants. Our Production facilities are decaying at rapid pace, and there is a price to be paid. The lack of industrial capacity will magnify the Inflation when it reaches the Consumer Price Index eventually, as cheap Imports turn into demons seeking to devour your Pocketbook, and George W. cannot sell any more Treasuries, as foreigners find little value in support of the Dollar when Americans have ceased buying Imports at such heightened rates. lgl