Alfred Woody's Kewl Blog [ 椼森 ]: Report: Food Prices Skyrocket: “We’re Going to Have a Major Problem Coming Into the Fall”

Thursday, May 15, 2014

Report: Food Prices Skyrocket: “We’re Going to Have a Major Problem Coming Into the Fall”

that will be made is that this is “transitory.” Unfortunately the intermediate (~1-3 months forward) and crude (~3-6 month forward) numbers tell a very different story.
The intermdiate trend in foods is bad news; that is a monthly change. Energy has been the counterbalance the last two months on an intermediate term, and has kept things in check, and “less foods and energy” has been reasonably-behaved — right up until this year. Now it’s looking less-so. But the alarm bells are not there, they’re in the forward trend on the crude side.
Here’s the problem — we’re several percent ahead of last year’s rate at this time of the year. Spring into early summer tends to have a PPI increase in crude goods. But if that spread continues we’re going to have a major problem coming into the fall as this works through the system, and given unit labor costs and productivity numbers (both going the wrong way too) there is no ability to absorb it.
Now let me point out that we’re not quite where you have to ring the “oh crap” bell yet. There’s another month or two before that happens — but by June, if the trend we’re seeing here hasn’t broken this will get into the forward economic analysis mindspace of most of the people who look at this stuff.
I don’t like the trend at all.
Charts and full analysis
Within the next couple of months we’re going to have a very good idea of where this is all headed. If prices don’t turn down, then by Fall we’re going to have a big problem:

There is no ability in the economy to absorb such price increases as productivity and unit labor cost figures have shown. Instead, what this will produce is recession – deep recession.

Look out below.
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