The June “Producer Price Index” (PPI) has been released and it is not pretty. The June PPI shows an 11.3% increase year-over-year in final demand products at the wholesale level. The fact that it is significantly higher than the CPI (9.3%) indicates that we are nowhere close to seeing a leveling off of the inflation rate. Joe Biden’s statement in December that inflation had peaked at 7% may soon look like a valley.
The “Producer Price Index” (PPI) is essentially the tracking of wholesale prices at three stages: Origination (commodity), Intermediate (processing), and then Final (to wholesale). At this point the Final Demand number has been in the double-digit range for seven consecutive months.
The PPI drives the much of the Consumer Price Index (CPI) albeit months later. We see this in the chart above. How long will it be before the CPI tops 10%? Businesses have to increase prices to remain solvent.
The effect of this level of inflation is the reduction in demand for durable goods and non-essential services (think dining out, etc.). The economy is contracting regardless of what the talking bobbleheads in the media say. Housing prices are topping out and a significant pullback in the housing market is starting. A record number of contracts to purchase housing have been withdrawn. The repossession rate on new and used vehicles has nearly doubled. People are hunkering down trying to conserve capital for the necessities of life. The increase in gasoline prices alone is taking thousands of dollars out of the pockets of everyday Americans.
We need to return to energy independence. However, the current inhabitants of the Oval Office would rather collapse the economy than do that.
The really scary problem is still on the horizon. That would be the cost of food this fall and winter. Not all of the farm production costs can be calculated just yet. The costs related to potash, nitrogen, etc. plus diesel and finally raw seed costs are in the ground at this point. Harvesting costs, especially diesel, are yet to come. Just how high will food go? With the problem of fuel additives for diesel becoming more apparent, will crops be unable to be harvested and left to rot in the fields?
We have already seen what happens when people go hungry. Sri Lanka’s government was toppled after they bought into the Green New Deal and their crop productions dropped precipitously. The riots going on in Europe are centered around farming and food production. More governments will fall soon.
In America, families are spending 15% more on food this year already. How much more will they have to spend to keep from starving?
One out of five are reduced to using food banks now, according to a new report. Another one out of five are skipping meals in this land of plenty to help keep food costs down.
Where will this all end? Revolution seems to be on the horizon. People are starting to rise up.