Energy prices may soon stabilize say analysts

IHS Global Insight sees lower producer prices and well-anchored wages as signs that inflation should moderate in the coming months

By ·

The latest Producer Price Index (PPI) shows that inflation remained in stand-still mode in August as an upsurge in food prices was offset by an equivalent decrease in energy prices.

“It’s a good-news, bad-news scenario,” said IHS Global Insight U.S. Economist Gregory Daco. “For shippers, it means getting a little break on fuel expenses.”

Food prices rose 1.1 percent boosted by higher meat prices, while energy prices fell 1.0 percent on lower petroleum, liquefied gas, gasoline and diesel prices. Core PPI inflation was up for the ninth consecutive month, gaining 0.1 percent. However, the year-over-year rate of increase is showing some tentative signs of plateauing.

Consumer goods prices were flat for the month – good news for households – but still 8.2 percent above last year – not so good news. IHS Global Insight expects these prices to edge down in the coming months as weaker demand puts downward pressure on prices. Capital equipment prices inched lower on weaker computer prices.

Overall, weaker economic growth domestically and abroad should continue to put downward pressure on most categories of producer prices with the exception of food prices (more susceptible to weather conditions). In an environment where producers have been squeezed by higher input costs (mostly from energy and food prices), the news of potential future declines in wholesale prices will be welcomed. But, it is uncertain whether battered businesses will want to reduce consumer prices as a result.

IHS Global Insight sees lower producer prices and well-anchored wages as signs that inflation should moderate in the coming months. If incoming economic data remains on the down side, this should push the Federal Reserve towards more monetary stimulus (but, probably not during the next FOMC meeting of September 20-21).


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

Energy · Global · Global Trade · All Topics
Latest Whitepaper
Managing Global Transportation: How NVOCCs can operate more profitably
Global transportation isn’t getting any easier to manage. With new rules and regulations to learn, new compliance requirements to adhere to, and new customers and business partners to onboard, navigating the complexities of the global market can be difficult for any company. To fully leverage their global supply chains, firms need a robust, global transportation management system that helps them navigate this ever-changing environment.
Download Today!
From the July 2016 Issue
While it’s currently a shippers market, the authors of this year’s report contend that we’ve entered a “period of transition” that will usher in a realignment of capacity, lower inventories, economic growth and “moderately higher” rates. It’s time to tighten the ties that bind.
2016 State of Logistics: Third-party logistics
2016 State of Logistics: Ocean freight
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Getting the most out of your 3PL relationship
Join Evan Armstrong, president of Armstrong & Associates, as he explains how creating a balanced portfolio of "Top 50" global and domestic partners can maximize efficiency and mitigate risk.
Register Today!
EDITORS' PICKS
Regional ports concentrate on growth and connectivity
With the Panama Canal expansion complete, ocean cargo gateways in the Caribbean are investing to...
Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....

Top 25 ports: West Coast continues to dominate
The Panama Canal expansion is set for late June and may soon be attracting more inbound vessel calls...
Port of Oakland launches smart phone apps for harbor truckers
Innovation uses Bluetooth, GPS to measure how long drivers wait for cargo