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Producer Prices, Retail Sales Rise In August

Wholesale inflation -- the cost of goods before they get to store shelves -- rose 1.7 percent in August and retail sales jumped 2.7 percent last month, but that came almost exclusively from the government-fueled "cash for clunkers" program.

If you remove auto sales from the Commerce Department's August numbers, retail sales rose only 1.1 percent, and you would think that's a direct relation to back-to-school shopping.

But it's not.

If you strip out gasoline, then August's retail sales number rose only .6 percent, and that's your back-to-school shopping number, and it's pretty light. To be fair, Labor Day was in September this year rather than August, and that's a big shopping weekend.

Still, the retail number shows softness, even though August showed a gain after July's loss of .2 percent. And the August number beat expectations of a 2 percent gain. Auto sales in August rose 10.6 percent compared to August of last year, juiced by the government's assistance.

On the producer price index number from the Labor Department, overall producer inflation rose 1.7 percent in August. If you strip out energy and other volatile costs, then core producer inflation rose only .2 percent.

The big surge in overall inflation came from gasoline prices, which jumped by the largest amount in a decade.

Forecasters expected an overall inflation hike of .8 percent. The expectation for core inflation was up .1 percent, close to the actual number.

While that seems like good news -- inflation is not rising very fast -- this economy could use a little healthy dose of inflation to stave off fears of deflation, which is a dangerous combination of downward-spiraling costs and wages, which leads to the contraction of an economy, which leads to bad things.

-- Frank Ahrens
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By Frank Ahrens  |  September 15, 2009; 8:22 AM ET
Categories:  The Ticker  | Tags: inflation, producer price index  
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Next: Markets Open Slightly Up on Retail Sales News


Isn't Labor Day always in September?

Posted by: Ashland | September 15, 2009 9:02 AM | Report abuse

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