This latter half of the trading week has already brought significant developments in our understanding of how things like inflation and employment are progressing through our present economy — or, at least, our economy of the very recent past. Weekly jobless claims totals are joined by monthly producer pricing levels this morning. And the takeaway? Inflation metrics continue to shrink steadily and measurably — keeping the narrative alive that we may yet be experiencing a “soft landing” from high inflation metrics over the last couple years.
First, the Producer Price Index (PPI) for June follows its sibling Consumer Price Index (CPI) from yesterday. The headline number here is +0.1%, below the +0.2% projected by analysts but ratcheted up month over month from -0.3% posted for May. Stripping out volatile food and energy costs, the “core” read is also +0.1% for last month, up a tick from the 0.0% printed the last time around. These numbers indicate growth at about the slightest rates attainable without high-priced outliers in things like fuel costs.
Year over year PPI was even more impressive, in terms of evidence that inflation is finally being wrestled to the mat: +0.1% on headline PPI year over year is the lowest single month registered since September 2020, and much lower than the downwardly revised +0.9% reported a month ago. Compare this to early 2022, when we were seeing year-over-year PPI levels north of +11%! Core year over year PPI reached +2.6% for June, 20 basis points (bps) lower than the +2.8% reported for May. These again show evidence of a soft landing for economic inflation (the Fed’s preferred level is +2.0%).
While PPI numbers do not have the impact that CPI numbers do, seeing the narrative falling in alignment is a sign that initial figures reported for CPI yesterday are relatively secure. In fact, the more data we accrue which proves inflation has cooled drastically over time, whether from CPI and PPI or elsewhere, the more we can move with confidence through market indices on a day-to-day basis.
Initial Jobless Claims for last week came in much lower than expected: 237K versus expectations of 250K, from a slight upward revision to 249K the previous week. Compare this to the cycle-high 265K recorded in mid-June. Today’s headline is the slimmest number of new jobless claims since late May, indicating strength in the labor market on a more finely tuned, weekly scale. These figures jibe with the strong employment numbers on display last week; layoffs through a wide swath of industries are not keeping Americans unemployed for long.
Continuing Claims, reported a week in arrears from new claims, rose 11K to 1.73 million — still a figure consistent with a healthy overall employment situation; in fact, as long as we’re below 2 million longer-term jobless claims, it could be considered a favorable aspect of the overall labor market. That said, this is the sort of metric that is going to keep the Fed stringent on interest rate policy. We’ll see if market levels grow past where a new 25 bps interest rate hike at the end of this month is already priced in.
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PPI Comes in Lower Than Expected
This latter half of the trading week has already brought significant developments in our understanding of how things like inflation and employment are progressing through our present economy — or, at least, our economy of the very recent past. Weekly jobless claims totals are joined by monthly producer pricing levels this morning. And the takeaway? Inflation metrics continue to shrink steadily and measurably — keeping the narrative alive that we may yet be experiencing a “soft landing” from high inflation metrics over the last couple years.
First, the Producer Price Index (PPI) for June follows its sibling Consumer Price Index (CPI) from yesterday. The headline number here is +0.1%, below the +0.2% projected by analysts but ratcheted up month over month from -0.3% posted for May. Stripping out volatile food and energy costs, the “core” read is also +0.1% for last month, up a tick from the 0.0% printed the last time around. These numbers indicate growth at about the slightest rates attainable without high-priced outliers in things like fuel costs.
Year over year PPI was even more impressive, in terms of evidence that inflation is finally being wrestled to the mat: +0.1% on headline PPI year over year is the lowest single month registered since September 2020, and much lower than the downwardly revised +0.9% reported a month ago. Compare this to early 2022, when we were seeing year-over-year PPI levels north of +11%! Core year over year PPI reached +2.6% for June, 20 basis points (bps) lower than the +2.8% reported for May. These again show evidence of a soft landing for economic inflation (the Fed’s preferred level is +2.0%).
While PPI numbers do not have the impact that CPI numbers do, seeing the narrative falling in alignment is a sign that initial figures reported for CPI yesterday are relatively secure. In fact, the more data we accrue which proves inflation has cooled drastically over time, whether from CPI and PPI or elsewhere, the more we can move with confidence through market indices on a day-to-day basis.
Initial Jobless Claims for last week came in much lower than expected: 237K versus expectations of 250K, from a slight upward revision to 249K the previous week. Compare this to the cycle-high 265K recorded in mid-June. Today’s headline is the slimmest number of new jobless claims since late May, indicating strength in the labor market on a more finely tuned, weekly scale. These figures jibe with the strong employment numbers on display last week; layoffs through a wide swath of industries are not keeping Americans unemployed for long.
Continuing Claims, reported a week in arrears from new claims, rose 11K to 1.73 million — still a figure consistent with a healthy overall employment situation; in fact, as long as we’re below 2 million longer-term jobless claims, it could be considered a favorable aspect of the overall labor market. That said, this is the sort of metric that is going to keep the Fed stringent on interest rate policy. We’ll see if market levels grow past where a new 25 bps interest rate hike at the end of this month is already priced in.