Companies’ cost of production is going up, up and away! Who gets stuck with those bills? Well, it’s us, the consumers. Many companies have stated they plan to pass those costs onto the end customer. Today’s Producer Price Index data gives us a good indication of what’s going on at the wholesale end. Tomorrow’s CPI data will show whether these extra costs have already resulted in price increases at your local shop-o-rama.
Several economists have claimed that inflation is already higher than the government numbers show, and that is slowing growth. But a look at the data would contradict that. Since the summer of 2008, Retail Sales has been travelling with PPI. And as prices have been increasing, so has Retail Sales:
Chart created using Hidden Levers app
Will Tuesday’s weaker Retail Sales data mark a change in this relationship between the economic levers? Maybe, but I think the better way to play this economic trend is follow PPI/CPI. Using the HiddenLevers screener, I found investment ideas, across sectors, which are positively impacted by higher inflation:
Prologis SBI (NYSE:PLD), an industrial REIT:
Smithfield Foods (NYSE:SFD), a meat products company:
International Paper (NYSE:IP), in the business of paper products:
If you can’t beat the trend, you might as well play the trend.