This morning, the government reported that producer prices rose by 1.7% last month. That’s twice what Wall Street was expecting. Most of the increase was due to higher energy prices. Gasoline, for example, rose 23%. This is evidence that inflation is brewing on the wholesale level. As the U.S. dollar decays, crude oil naturally rises.
The core rate, which excludes food and energy prices, was only up 0.2% compared with Wall Street’s estimate of 0.1%. The low core rate, however, will not last.
The other news this morning is that retail sales rose by 2.7% which was above the consensus of 1.9%. Excluding autos, this was an incredibly bullish report, especially because back-to-school sales were impacted by a late Labor Day. This is the best news in several months.