Long Term Perspective
Prices of crude and intermediate materials excluding food and energy seemed to peak in early 2000 on a year over year basis. In the third and fourth quarters of 2000 and throughout 2001, price increases became smaller. Prices turned around in 2002, which reflects a turnaround in manufacturing activity more than it does a potential for accelerated inflation rates for finished goods. While price changes in the earlier stages of processing sometimes get passed along to the finished goods index, there are times when they don't.

Short Term Perspective
Excluding energy prices, crude materials prices have risen in the past few months suggesting increased demand for crude materials used in manufacturing. This isn't unusual in the early stages of recovery. In August, intermediate goods prices rose on a year-over-year basis for the first time since June 2001; the trend continued in October. While prices are firming up because economic activity is improving, these price hikes may not necessarily pass along the pipeline and could hurt profits.

PPI: Intermediate vs. Crude Materials   •   Excluding Food & Energy Prices: Intermediate vs. Crude   •   CPI vs. PPI - Finished Goods

Excluding Food & Energy Prices : CPI vs. PPI   •   Employment Cost Index vs. Wages & Salaries   •   Alternative Inflation Measures