Jason Furman on the Cost of Tax Cuts
Why Oh Why Can't We Have a Better Press Corps?

A Little Bit of Bad Inflation News...

Good news on the core PPI: up only 0.2%

Wholesale Prices Jump in June - New York Times: By JEREMY W. PETERS: Published: July 18, 2006: The Labor Department said today that the producer price index rose 0.5 percent in June, following a 0.2 percent increase in May. The consensus forecast among economists had been for a 0.3 percent increase in June. A separate calculation of producer prices excluding the food and energy categories, which are subject to volatile monthly swings, showed more modest increases. That figure, known as the core index, rose 0.2 percent in June, in line with economists' expectations; it rose 0.3 percent in May....

There were conflicting signals in today's Labor Department report, leaving analysts to differ over how severe the inflationary pressure now is. "Wholesale price inflation continues at a pace that makes the Federal Reserve uneasy, even as economic growth slows," said Peter Morici, a professor at the University of Maryland School of Business. "Today's producer-price data indicate that another interest rate hike is likely, even if it poses considerable risks to growth." Noting that much of the increase in June related to higher food costs, Kenneth Beauchemin, an economist with Global Insight, said, "Given that these price movements are the consequence of bad luck on the supply side, and not fundamental inflationary pressures, the Fed will be satisfied with the downward move in the core rate."

Nobody has told Jeremy Peters that he needs to look at the market's reaction to the news:

AP Wire | 07/18/2006 | Treasurys down after inflation update: Yields on three-month Treasury bills rose 5.13 percent as the discount rose 0.05 percentage point to 5.00 percent.

More traders with more money took this news as a sign that the Federal Reserve will be more worried about inflation and more likely to raise interest rates. That would have been, perhaps, the most useful thing Jeremy Peters could tell his readers about the PPI number.