“With each passing day,” we observed last week, “inflation seems less and less a theoretical fiction, and more and more a genuine threat… No self-respecting economist or self-aggrandizing central banker is acknowledging any inflationary risk whatsoever,” we continued. “But the indifferent data points of real-world prices testify to the contrary.” Shortly after airing these remarks we learned that import prices soared 1.2% during the month of December alone – lifting the year-over-year surge in import prices to 4.7%. The following day we learned that producer prices jumped 3.8% year-over-year. A few days after that, the Federal Reserve Bank of Philadelphia announced that producer prices in the Philadelphia region had jumped to their highest levels since July 2008.
These data points do not prove that an inflationary threat is stirring, but they do offer compelling testimony. Meanwhile, commodity prices are providing ample corroborating evidence. During the past eight months, the Reuters/Jefferies CRB Index of commodity prices has soared 32% – far outpacing the stock market over that timeframe. The grain complex, in particular, has been on a tear, as the prices of both wheat and corn have nearly doubled since last summer
These eye-popping gains may be exceptional, but they are hardly unique. All but one of the 19 commodities in the CRB Index has advanced during the last two years. (more)
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