Energy Holds Up Producer Price Index
Source: Forbes, Alexandra Zendrian (9/21/09)
"The PPI only increased 0.2% when you take out food and energy companies."
The Producer Price Index, which measures the average change in sales prices, was up 1.7% in August. . .The Consumer Price Index was up .4% last month, although it's down 1.5% since last year. From 1983 to 2003, the PPI has been below the CPI, says Matt Lloyd, chief investment strategist at Advisors Asset Management. . . Both the PPI and the CPI were propped up by the energy sector. The PPI only increased 0.2% when you take out food and energy companies. The CPI's growth last month was driven by a 9.1% increase in the gasoline index. Lloyd attributes this increased energy use to the economic recovery taking hold, particularly in developing markets. As these economies bounce back, they're relying on energy to fuel their factories and businesses.
The figures bear out the increased demand for fuel. The U.S. EIA noted that in August gasoline prices, for example, averaged $2.67 nationwide, a dramatic increase from $2.01 in March. While oil and gas don't track exactly, the higher demand for the latter shows one way in which the economy is on the move.