Thursday, August 12, 2021
Following yesterday’s Consumer Price Index (CPI) release for July — which analysts had been hoping would moderate from hotter reads previously, and for the most part they got it — this morning’s sister report, the Producer Price Index (PPI), hits the tape this morning. Contrasting the CPI headline, PPI has jumped higher than expectations: +1.0% versus +0.6% consensus.
The “core PPI” read (stripping out volatile food and energy prices) also reached +1.0% — doubling analysts’ expectations. This matches June’s +1.0%, which came in as the highest-ever month-over-month core PPI print. Month-over-month ex-food, energy and trade, this figure moderates only slightly to +0.9% — higher than expected and a jump of 40 basis points over the previous month.
The year-over-year PPI headline came in at a new all-time high +7.8%, half a percentage-point higher than June. Year-over-year core PPI reached +6.2%, and stripping out food, energy and trade from the headline number, this came in at +6.1%. These are also both new all-time highs, and clear illustrations that inflation has indeed manifest itself into the U.S. economy.
So, does this mean inflation is starting to take over the economy and the Fed has been asleep at the wheel, as some analysts had been fearing? Not so fast. First, while +1.0% on headline was a big push forward from estimates, it’s still lower than the +1.2% headline we saw back in January; these numbers month over month do have ways of self-moderating, and one month’s headline data does not a trend make.
Also, consider the 9% jump in passenger transportation in today’s data. This generally relates to airfare prices, and here in the summer months, air travel had indeed picked up, especially considering the Delta variant of Covid-19 had not yet scared citizens away from making travel plans, which they may yet do. On the CPI numbers yesterday, passenger transportation did show some moderation. Also, e-commerce showed some cooling off in July.
So while PPI data is stronger than economists had been looking for — and certainly higher than the Fed would like — CPI demonstrated pricing was not out of control as of last month. The Fed’s patience in acting on tapering asset purchases, let alone raising interest rates, does seem to be somewhat justified here — new year-over-year highs on PPI notwithstanding. That said, look for tapering talk to increase as analysts digest these figures going forward.
Thursday morning also almost always means Initial Jobless Claims data, and this week is no exception: 375K new claims were exactly in-line with estimates, and down 12K from the upwardly revised 387K the previous week. This also takes the trailing three-month average down to 386K. Over the past 12 weeks, we’ve seen initial claims headlines in a range from 368K-444K. We’re closer to the lower end currently, which is good.
Continuing Claims printed a fresh pandemic-era low 2.87 million, down from the upwardly revised 2.98 million the previous week. This is the second-straight week sub-3 million and going in the right direction. Recall a year ago we were still seeing 14 million Americans out of work, even though the first wave of the pandemic had passed. Yet we still have some road ahead until we’re back in the 1.7 million territory back prior to the pandemic.
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PPI +1.0% Hotter Than Expected, Jobless Claims In-Line
Thursday, August 12, 2021
Following yesterday’s Consumer Price Index (CPI) release for July — which analysts had been hoping would moderate from hotter reads previously, and for the most part they got it — this morning’s sister report, the Producer Price Index (PPI), hits the tape this morning. Contrasting the CPI headline, PPI has jumped higher than expectations: +1.0% versus +0.6% consensus.
The “core PPI” read (stripping out volatile food and energy prices) also reached +1.0% — doubling analysts’ expectations. This matches June’s +1.0%, which came in as the highest-ever month-over-month core PPI print. Month-over-month ex-food, energy and trade, this figure moderates only slightly to +0.9% — higher than expected and a jump of 40 basis points over the previous month.
The year-over-year PPI headline came in at a new all-time high +7.8%, half a percentage-point higher than June. Year-over-year core PPI reached +6.2%, and stripping out food, energy and trade from the headline number, this came in at +6.1%. These are also both new all-time highs, and clear illustrations that inflation has indeed manifest itself into the U.S. economy.
So, does this mean inflation is starting to take over the economy and the Fed has been asleep at the wheel, as some analysts had been fearing? Not so fast. First, while +1.0% on headline was a big push forward from estimates, it’s still lower than the +1.2% headline we saw back in January; these numbers month over month do have ways of self-moderating, and one month’s headline data does not a trend make.
Also, consider the 9% jump in passenger transportation in today’s data. This generally relates to airfare prices, and here in the summer months, air travel had indeed picked up, especially considering the Delta variant of Covid-19 had not yet scared citizens away from making travel plans, which they may yet do. On the CPI numbers yesterday, passenger transportation did show some moderation. Also, e-commerce showed some cooling off in July.
So while PPI data is stronger than economists had been looking for — and certainly higher than the Fed would like — CPI demonstrated pricing was not out of control as of last month. The Fed’s patience in acting on tapering asset purchases, let alone raising interest rates, does seem to be somewhat justified here — new year-over-year highs on PPI notwithstanding. That said, look for tapering talk to increase as analysts digest these figures going forward.
Thursday morning also almost always means Initial Jobless Claims data, and this week is no exception: 375K new claims were exactly in-line with estimates, and down 12K from the upwardly revised 387K the previous week. This also takes the trailing three-month average down to 386K. Over the past 12 weeks, we’ve seen initial claims headlines in a range from 368K-444K. We’re closer to the lower end currently, which is good.
Continuing Claims printed a fresh pandemic-era low 2.87 million, down from the upwardly revised 2.98 million the previous week. This is the second-straight week sub-3 million and going in the right direction. Recall a year ago we were still seeing 14 million Americans out of work, even though the first wave of the pandemic had passed. Yet we still have some road ahead until we’re back in the 1.7 million territory back prior to the pandemic.
Questions or comments about this article and/or its author? Click here>>