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Why Recession Is Not A Guarantee In 2008


In its biggest month-over-month jump since 1973, the Producer Price Index rose 3.2 percent in November.

PPI is like a “cost of living” measurement for consumer, except that it applies to business.

PPI measures how expensive it is to produce goods on a day-to-day basis.

PPI spiking in November is an important development for all of us. When businesses spend more to create outputs, they may decide to pass those higher costs on to consumers.

Sometimes, they pass on the costs right away. Sometimes, they wait. Eventually, consumers could more for everything because businesses are paying more.

Now, economists and experts will say “if we don’t count the cost of energy and food, business costs only rose 0.4% in November”.

Yes, they’re right. But costs are costs and businesses still have to pay them. And the price of energy is not expected to cheapen anytime soon.

Eventually, we all could pay more and, when we do, it will be called “inflation”. That would be bad for mortgage rates.

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