Today’s report of a high 4.9 percent third-quarter gain in productivity, or output per hour, strongly suggests that the commodities boom is not inflationary.
In relation to booming economic demands worldwide, commodity supplies are scarce. Over time, high commodity prices will stimulate big increases in commodity investment and production. But in the short run, the high commodity-price signal means that commodities are still scarce. It’s a relative price adjustment, not a true global inflation.
From the latest inflation report:
Thus far this year, energy costs have risen at an 11.7 percent SAAR after increasing 2.9 percent in all of 2006. In the first nine months of 2007, petroleum-based energy costs (energy commodities) advanced at a 20.6 percent rate and charges for energy services (gas and electricity) increased at a 1.3 percent rate. The food index rose at a 5.7 percent SAAR in the first nine months of 2007 after advancing 2.1 percent in all of 2006. Grocery store food prices increased at a 6.7 percent annual rate in the first nine months of 2007, reflecting acceleration over the last year in each of the six major groups. These increases ranged from annual rates of 4.0 percent in the index for other food at home to 17.7 percent in the index for dairy products.
No -- there's no inflation at all. None at all.