At least some of us have been surprised by the limited extent to which inflation in the earlier stages of production has been passed on in either the consumer price index or the finished goods index of the producer price index. With the release of data for April, we may no longer need to be surprised.
The core finished goods index rose by 0.4 percent in April. It has now risen at a 5.0 percent annual rate over the last quarter. The core intermediate goods index rose by 1.2 percent in April and has risen at a 12.4 percent annual rate over the last quarter. With productivity growth having slowed sharply, it is difficult to believe that these higher costs won't be passed on at the consumer level. This is big news.
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