No Inflation Seen in Key Index

If you’re waiting for the Inflation Monster to rear its ugly head….you can keep waiting. Declining energy costs and a stagnant economy are holding prices in check. The latest evidence: the producer price index (PPI) fell 0.8% for November. That was the steepest drop since May, according to a Labor Department report.

The big exception is in wholesale food prices, which rose by the biggest margin in two years. Most of the increase is due to beef and vegetable scarcity, an outcome of the extreme drought conditions that ruined crops and reduced yields throughout the center of the country for most of this year. Vegetable prices are up 12%, and beef prices rose 8.2%. Potatoes are cheap and plentiful, however, due to a bumper fall crop in the Pacific Northwest, an area untouched by this year’s drought.

Retailers may choose to swallow some of the food price hike, rather than passing it along to consumers, who are increasingly frugal. Continuing high unemployment, stagnant wages and weak export markets make consumers more likely to seek bargains in the grocery aisle and elsewhere.

On the bright side, low inflation means low interest rates. According to the same article, the Federal Reserve plans to keep the short-term interest rate near zero until unemployment falls to 6.5% or below. That does not seem likely to occur in the near future, and inflation will probably remain low for the next year or two. That’s great if you qualify for a loan, but not so great if you own a bank.

For trucking, this trend means rates are unlikely to rise much, especially in the off-season. If your current mix of freight doesn’t pay enough to meet your business needs, check our Hot Market Maps in our DAT Load Boards and DAT Truckload Rate Index. With a little research, you will discover high-demand markets and lanes, and some new business opportunities.