A follow up to NYT: Room for Debate

Today's New York Times online Room for Debate, includes a forum on food prices, including yours truly.

It's funny how when you see these things in print they somehow look different than when you wrote them. So, below I'm going to provide some context and a few details in case anyone finds the blizzard of seemingly inconsistent statistics quoted on Room for Debate a little confusing.

There are zillion price indexes out there and here the hubbub is about the food component of the Producer Price Index (PPI), which is supposed to track wholesale prices. Note the PPI tracks goods at all stages of processing. Here's a link to a table with some recent numbers from the PPI.

It is important not to confuse the PPI with either the CPI or the prices raw commodities. The CPI (Conumer Price Index) tracks prices of things we actually buy and is the standard measure for inflation. Here is a fantastic interactive graphic at the New York Times that shows all the tiny pieces of the CPI. And here is a thoughtful piece by Jim Hamilton over at Econbrowser about how much of variation in the CPI is due to monetary policy verses component fluctuations, like food and energy (which fluctate the most).

With regard to commodity prices, those are easy to look up at the New York Times or Bloomberg. These have seen the biggest fluctuations over the last few years. The 70 and 55 percent numbers I was loosely quoting in Room for Debate were about commodity price indexes--composites of a large number of individual commodities raw. Here's where you can find them at bloomberg. The graph shows the preciptous decline and modest incease in recent months. If you were to extend the graph back in time you would see the runnup to last summer's truly remarkable highs.

For perspective, here is a graph showing the overall CPI and the food components of the CPI and PPI over the last few years. Below that is Bloomberg's graph of commodity price indexes.
Basically, the news is that prices have stopped their precipitous collapse. And that news is probably good. It means deflation is less of a risk and probably one of those small green shoots everyone is talking about.


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