America's Apple Pie is Getting More Expensive

As the second leg of the housing downturn gets underway, our white picket suburban fences are definitely getting cheaper (assuming one can get a loan from our still insolvent financial institutions - good luck, you're only competing with the Federal Reserve for their attention).  But that 40% of our spending basket which Bernanke conveniently excludes from the CPI, food and energy, are definitely rising.  As readers know, the U.N.'s approval of bombing Libya last night will all but guarantee that filling up your SUV will soon cost a second mortgage.  But as Bill Dudley apparently doesn't know, food prices are on the rise.

To wit, an interesting observation from John Lohman (though we can't seem to verify his credentials) via Zero Hedge:

"It’s understandable that this morning’s spike in finished consumer food prices received little attention.  What with a mini-crash in housing starts, spent fuel pools running dry, USDJPY breaking the BOJ’s strike price of 80, and busted underwater POMO trades, there was no shortage of distractions.

Nevertheless, anytime an ecostat comes in at the 4th highest reading in its 64 year history, it’s worth taking note.  As shown in the chart below, the finished consumer foods component of the Producer Price Index jumped 3.9% in February alone.  But not to worry.  The core PPI only rose 0.2% in the month and ‘inflation expectations [among blue chip economists] remain subdued’.  Paging Mr. Dudley…"

Our own regressions suggest this 3.9% rise in the PPI's food component correlates with a 3.0% monthly rise in the CPI's food component in the next one to three months.  It's coming.