(Click chart to expand)
The chart above shows the annual inflation rates for: a) crude foodstuffs and feedstuffs (e.g. wheat, corn, animals for slaughter, peanuts, cottonseed, and soybeans), and b) finished consumer foods (pasta products, processed meats, bakery products, fresh fruits and vegetables, tree nuts, and eggs), based on today's BLS report on Producer Price Indexes (pdf) through May.
It's interesting to note the following:
- Inflation for crude foodstuffs and feedstuffs is much more volatile (monthly standard deviation of almost 14% over the last ten years) than inflation for finished consumer foods (standard deviation of 3%).
- Double-digit inflation (0r deflation) rates in crude food items (like we've had for the last 11 months now starting last July) never translate into double-digit inflation (deflation) rates for finished consumer food products.
- The current 12-month inflation rate of 4.0% through May for finished consumer foods is only slightly higher than the 3% average over the last ten years (see red line above).
- The annual inflation rates in May of 24.1% for crude foodstuffs and 4% for finished consumer foods were both lower than the recent peaks of 29.1% for crude foodstuffs and 7.4% for finished consumer foods in February of this year.
Based on the May PPI data for food, I think it's still hard to make a strong case for inflationary pressures building in the U.S. economy.