The markets are supposed to be surprised by the high rates of inflation shown in the producer price indexes this morning. The overall finished goods index rose by 3.2 percent, driven by a 14.1 percent jump in energy prices. The core index rose by 0.4 percent, the largest increase since February. The core intermediate goods index rose by 1.0 percent, suggesting more inflationary pressure down the road. These increases are not a surprise to folks who paid attention to the import/export price data reported yesterday. There were big jumps reported for both the price of non-oil imports and non-agricultural exports, as noted here. A falling dollar does affect the rate of inflation, but it can take time.
--Dean Baker
