The producer price index for August came in at a much higher-than-expected 1.7% increase for the month, following a 0.9% decline in July and a 1.8% increase in June. The consensus expectation was for a rise of just 0.8%.

However, it was almost all because of higher energy costs. Core (ex food and energy) inflation was just 0.2% (just a notch higher than the 0.1% expected), following a 0.1% decline in July and a 0.5% increase in June. Energy prices rose 8.0% following a 2.4% decline in July and a 6.6% increase in June.

On a year-over-year basis, producer prices were 4.3% lower, but in July they were 6.8% lower. Core producer prices are up 2.8% on a year-over-year basis. The year-over-year numbers are going to start looking much hotter in the future, as most of the really big declines were in the fall of last year, especially in the fourth

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Of the three major economic reports released today (see also: "Increasing Starts - NOT Good News" and "Slack in the Industrials System"), the report on producer prices was by far the best news. Overall, producer prices for finished goods increased at a rate of just 0.2%. A big 2.9% increase for Energy was offset by a 1.6% decline in finished food prices. This left the change in core (ex food and energy) producer prices down 0.1%. The scare about outright deflation, which looked very possible last fall when the overall PPI fell 2.6%, 2.7% and 1.8% in October through December, has passed. On the other hand, inflation has not started to rear its ugly head. On a year-over-year basis, producer prices are still accelerating to the downside, now at -5.0% vs. 3.7% in April and 3.5% in May. However, that is due to very large increases ...

Last week’s crude and gasoline inventories dropped more than expected as the effects of Hurricane Gustav resulted in some production disruptions. Gustav, which struck last month, was the fourth-most-destructive storm to hit the United States, causing $20 billion in damages. And then came Hurricane Ike. Ike made landfall in the Galveston area of the U.S. Gulf Coast on in the pre-dawn hours Saturday (the day I was penning this column) as a Category 2 storm with winds hitting 110 miles per hour.  Ike’s path toward Houston makes it the first storm to hit a major U.S. metropolitan area since Hurricane Katrina eviscerated New Orleans in 2005, Bloomberg News reported. We won’t know how much direct damage those high winds from Hurricane Ike will cause for several days at least. From the initial reports, the results appear to be devastating. But the indirect costs are ...