Core finished goods PPI declines, but service sector prices accelerate

The headline number for yesterday’s October 2009 Producer Price Index report gives us inflation worrywarts reason to cheer: a 0.6 percent decline in the price of finished goods, not including food and energy. Yay!

Dig a little deeper, however, and there is an ominous sign — namely, the PPI for service sector industries increased a whopping 0.5 percent from September ’09. Business Week’s chief economist,  Michael Mandel, argues that  the service sector PPI covers a broader swathe of the economy (“everything from telecommunications and web search portals to health care to banking to management consulting to fitness centers”) than core finished goods, and thus is a better measure of underlying inflation.

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