15 Oct 2008

New PPI Numbers: More BS from the BLS?

All Posts No Comments

Earlier this year, the Bureau of Labor Statistics (BLS) came out with a report saying that gasoline prices had declined 4.6% from March to April. Now this seemed insane, since, well, gasoline prices had been breaking record highs (and continued to do so into the summer).

At first I suspected an outright lie, but then someone reminded me of “seasonal adjustments.” I.e., people start driving more, the refiners have to switch out of winter blends, etc., and so maybe gasoline prices always spike from March to April. Well, I spent a few hours trying to figure out the BLS’ calculations, and got nowhere. (To turn the government’s wiretapping rhetoric back on itself: If the BLS methods are above-board and scientific, why don’t they publish them, like any academic would do?) Here is my report on that sorry fool’s errand.

Well, it seems they are still in the smoke-and-mirrors game. Today the PPI numbers for September came out, and they show that producer prices in various categories fell from August to September, once you do the seasonal adjustment. Well, as I explain in the article I linked above, I don’t trust their seasonal adjustments, because they are basically asking us to take their word for it.

One way to get around the seasonal adjustments is to look at year/year increases; i.e., you compare the actual index value for September 2008 with the actual index value for September 2007. The BLS reports such figures as “unadjusted.” Well, if we look at Table B (which is actually the 3rd table shown) about halfway down this BLS release, we learn the following:

* From Sept. 07 to Sept. 08, the prices of “intermediate goods” went up 15.4%.

* From Sept. 07 to Sept. 08, the prices of “crude goods” went up 26.0%.

(Note: If you click on the link to see for yourself, don’t be thrown by the negative numbers in some of the cells of Table B. Those all refer to one-month changes in the seasonally adjusted indices, which I trust as far as I can throw 42 gallons of gas. Only two of the columns report year/year unadjusted changes in the indices, and as you can see, those numbers in both categories–intermediate and crude goods–have all been in the double-digits since March 2008.)

Also, if you look at Table A in the BLS link, there is a column for year/year unadjusted changes in “finished goods,” and that is showing an 8.7% increase from September 07 to September 08.

I’m still waiting for this alleged deflationary depression to hit us. Maybe it will–and I know a few very sharp economists who could tell a story to reconcile the above facts with low future price inflation. But so far I see no evidence of it, especially when you look at what Bernanke has done with the monetary base lately. Note that the below graph is of annual percentage change; it would be unfair of me to show you the levels, since that picture is just scary.

Comments are closed.