PureStone Partners LLC

The CPI for September was released today.  Nothing all that surprising – it looks like the rebound last month towards a positive trend (perhaps not for everyone), or an upward trend continued for a second month.  It appears as if the trend may be resetting with a 1.3% drop from where we were in Sept 2008.

How to use this information:  Have your internal statistician look at CPI (and PPI) and see if they give you any early warning signs against some of your variable costs – raw materials, finished goods, average selling price, etc.

• Does CPI move with your Cost of Goods Sold (COGS), or your margins?
• Could it give you a one month warning to tighten the belts a little bit?
• What is the impact on your average selling price?
• Do your customers move faster than you?

Historical Trends

If we look at this from a historical perspective, we can tell there has been a stead upward trend since the mid 60’s.  The variability was pretty consistent from the mid 60’s through 2004, then in 2005 it looks like the variability began to increase.  These charts don’t provide us much actionable information, but show us the trend has been consistent, and that there was a disruption with the recent economic conditions.  This disruption is what is highlighted in the earlier part of this blog.