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Wholesale prices advance faster than expected in April

By Holden Lewis · Bankrate.com
Tuesday, May 18, 2010
Posted: 9 am ET

Wholesale prices rose faster than expected in April. This might not be enough to force an increase in mortgage rates, but it's something to be concerned about.

The core Producer Price Index rose by 0.2 percent in April, according to the Department of Labor. The consensus prediction had been a rise of 0.1 percent. With wholesale inflation higher than expected, mortgage rates are more likely to rise than to fall today. But a rate rise isn't a sure thing.

Wednesday brings the more influential Consumer Price Index. If the CPI rate is higher than expected, don't be surprised if mortgage rates rise. With today's bigger-than-expected increase in PPI, it wouldn't be surprising if tomorrow delivers a bigger-than-expected increase in CPI.

Note that when I say the core PPI went up 0.2 percent, I'm talking about the core rate, which excludes food and fuel. When you include those two volatile sectors of the economy, wholesale prices actually declined in April, by 0.1 percent. That's because wholesale energy prices fell 0.8 percent in April, and wholesale food prices fell 0.2 percent. One oil spill, or a flood in a farming region, could reverse those declines quickly. Because food and fuel prices tend to rise and fall from month to month, policymakers tend to bestow those items with less import when measuring inflation.

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