Yet Another Sign of Inflation Ahead ; US Producers Paid More for Raw Materials Last Month, So They May Charge More for Final Products in Months to Come

By Ron Scherer writer of The Christian Science Monitor | The Christian Science Monitor, October 19, 2005 | Go to article overview

Yet Another Sign of Inflation Ahead ; US Producers Paid More for Raw Materials Last Month, So They May Charge More for Final Products in Months to Come


Ron Scherer writer of The Christian Science Monitor, The Christian Science Monitor


In a worrisome sign, inflation is starting to ripple through the US economy in the form of higher prices for products that businesses use to make things.

Prices for aluminum, steel, paper, plywood, and plastic resins are now ticking upward. Although it's not definite that consumers will ultimately pay more for final products containing such materials, at least some of these price hikes are likely to end up on price tags in the months ahead, primarily because the economy is running closer to capacity and because manufacturers appear to have more leeway to raise prices.

In the latest sign that inflation is becoming more embedded in the economy, the government reported Tuesday that the Producer Price Index (PPI), a measurement of wholesale prices, leaped by 1.9 percent in September. Although much of this increase is attributed to hurricanes and rising energy prices, the report also showed that prices rose 1.2 percent for core intermediate goods, a key measurement watched by the Federal Reserve. Often, price increases at this level get passed on to consumers.

The pop in wholesale prices follows a jump in the September Consumer Price Index of 1.2 percent. Together, the numbers confirm that the Fed is correct to be worried about inflation, some economists say. The latest report will help to persuade the Fed to continue raising interest rates through next spring, possibly by as much as a full percentage point above the current level, they add.

"The inflation number ensures [that] the Fed will keep tightening and implies slower growth next year," says Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla. "These are pretty scary numbers."

The Fed is on alert

In recent weeks, Fed officials have been blunt about their concern. In speeches, they indicated that the central bank needs to ward off any surges in the cost of living. Fed Chairman Alan Greenspan, in Tokyo on Tuesday, said the higher energy prices "will undoubtedly be a drag from now on."

Although the inflation numbers are the highest since 1974, economists say some factors that contributed to the rise may not be repeated. For example, a big jump in prices of passenger cars and trucks is a result of Detroit automakers ending many of their large discounts.

At the same time, gasoline prices have backed off from the record highs set after hurricane Katrina roared through the Gulf Coast. In September, gasoline prices peaked above $3 a gallon. Today, according to GasPriceWatch.com, the national average is $2.66 a gallon. "We may see energy prices level off," says Mark Zandi, chief economist at Economy.com, an economic website.

Energy prices may continue to fall. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Yet Another Sign of Inflation Ahead ; US Producers Paid More for Raw Materials Last Month, So They May Charge More for Final Products in Months to Come
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.