It’s another big week for the economy and markets with the latest reads on inflation for both consumers and businesses. First up this time is the Producer Price Index, which measures the change in prices paid at the wholesale level. At first glance, it came in worryingly above expectations with a 0.5% gain in April compared to the estimate of 0.3% at the headline level (0.5% vs. just 0.2% for core). Stock futures quickly sold off as bond yields resumed climbing. However, it turns out that the monthly number was partially inflated due to a sizable downward revision to the March numbers, which fell from 0.2% as initially reported to -0.1%. This means that the year over year numbers didn’t change much – the headline was stable at 2.2%, while the core ticked up slightly to 2.4%. Upon this realization, markets began to recover from their initial negative reaction.
These reports will continue to be dissected from every angle as long as the Fed expresses a desire to lower interest rates at some point while the inflation data refuses to cooperate. This morning’s PPI report presumably didn’t move the Fed any closer to having the “greater confidence” that they’re looking for that broader inflationary pressures are settling back closer to their 2% target. Simply put, today’s PPI was more of the same from what we’ve seen out of inflation so far this year – that it remains too sticky.
Next up, all eyes will be on the Consumer Price Index report at 8:30am EST tomorrow morning…stay tuned.
Source: Bloomberg, as of 5/14/24
Source: Bloomberg, as of 5/14/24
Carl Noble, CFA®
Senior Vice President of Investments
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