December 10, 2022 | Producer Price Index (PPI), Freight Costs, Big Tech Companies, Plant-Based Meat, and Sole Proprietor or S-Corp

<p>Producer Price Index (PPI)</p> <p>Although the headline Producer Price Index (PPI) number saw a gain of 0.3% compared to last month, I actually thought the report was in line with what we’d been expecting. If you look compared to last year the PPI increased 7.4% which is a nice deceleration from the 8% level in October and the peak of 11.7% in March. Part of the reason for the deceleration is the comps are getting harder. What I mean by that is last year the PPI showed an annual gain of 10% compared to the prior year. When we lap the 11.7% number in March, I believe it will be hard to grow another 7-8% off that number, especially with the decline in many commodities from their peak levels. As a reminder we don't believe inflation will be disappearing in 2023, we believe it will be decelerating to a level of around 4-6% for the full year.</p> <p> </p> <p>Freight Costs</p> <p>More positives on the inflation front. Remember how constrained shipping was last year and how expensive it had become? Well now if you look at the prices, they have come way down. Freight costs from Asia-U.S. West Coast have fallen 90% compared to last year and now stand around $1,426/FEU (forty-foot equivalent unit). This pushed prices down by 5% when compared to 2019 levels. Freight costs from Asia-U.S. East Coast now stand around $3,723/FEU which is down 78% compared to last year and costs from Asia-Northern Europe are around $3,974/FEU which is 73% lower than last year.</p> <p> </p> <p>Big Tech Companies</p> <p>I learned a long time ago not to just read headlines and think you understand what is going on. People have been saying things are getting worse because they see the big tech companies laying off people with headlines showing numbers like 10,000 layoffs coming. We have said that’s only a small part of the big picture and if you look at the recent jobs report, you will see the information sector, which includes many tech jobs, had a net increase of 20,000 jobs. I know it takes time to read the details when information comes out b