The latest Producer Price Index (PPI) report for the month of September is out this morning, with results somewhat hotter than economists were looking for. Headline month-over-month came in at +0.5% — down 20 basis points (bps) from August but 20 bps higher than expected. Stripping out volatile food and energy prices, this recedes to +0.3%, still hotter than the +0.2% anticipated and posted for the previous month.
Those month-over-month prints are useful, but it’s the year-over-year results that tend to have a greater impact on the economy — or, more specifically, the Fed and its relation to interest rates. Headline year over year came in at +2.2%, higher than the upwardly revised +2.0% for August. Core year over year reached +2.7% — still below the +3% level and in-range of early 2021 — and was 20 bps higher than the previous month’s read. For context here, cycle highs were in April of 2022: +9.6%. We’ve come a long way, baby.
Regardless, these numbers are a little too steamy for comfort. We already know the Fed puts a larger weight on Consumer Price Index (CPI) numbers, and those don’t come out until tomorrow. And while we do not see these somewhat higher PPI figures necessarily translating into notably higher CPI results tomorrow, should we see CPI numbers elevate higher than the +0.3% expected on headline and core month over month, and +3.6% year-over-year headline and +4.1% core (both lower than the previous month’s prints), then we could see expectations heat up for another rate hike at the next Fed meeting three weeks from today.
There will be plenty of additional economic data out before then, not to mention we’ll be in the heart of Q3 earnings season, but yesterday’s dovish tone from Fed officials may give way to something more hawkish. We’ll also see minutes from the last Fed meeting, where the monetary policy body opted to hold pat on its current 5.25-5.50% Fed funds rate, and see details about the Fed’s concerns as of a few weeks ago.
None of this has had a major negative impact on pre-market trading in the major indices this morning. Though we are off early highs, the Dow is still +70 points, the S&P 500 +10, the Nasdaq +55 points and the small-cap Russell 2000 — the biggest gainer over the past week — is +2 points.
Questions or comments about this article and/or author? Click here>>
Image: Bigstock
PPI Warmer than Expected, Fed Minutes Later
The latest Producer Price Index (PPI) report for the month of September is out this morning, with results somewhat hotter than economists were looking for. Headline month-over-month came in at +0.5% — down 20 basis points (bps) from August but 20 bps higher than expected. Stripping out volatile food and energy prices, this recedes to +0.3%, still hotter than the +0.2% anticipated and posted for the previous month.
Those month-over-month prints are useful, but it’s the year-over-year results that tend to have a greater impact on the economy — or, more specifically, the Fed and its relation to interest rates. Headline year over year came in at +2.2%, higher than the upwardly revised +2.0% for August. Core year over year reached +2.7% — still below the +3% level and in-range of early 2021 — and was 20 bps higher than the previous month’s read. For context here, cycle highs were in April of 2022: +9.6%. We’ve come a long way, baby.
Regardless, these numbers are a little too steamy for comfort. We already know the Fed puts a larger weight on Consumer Price Index (CPI) numbers, and those don’t come out until tomorrow. And while we do not see these somewhat higher PPI figures necessarily translating into notably higher CPI results tomorrow, should we see CPI numbers elevate higher than the +0.3% expected on headline and core month over month, and +3.6% year-over-year headline and +4.1% core (both lower than the previous month’s prints), then we could see expectations heat up for another rate hike at the next Fed meeting three weeks from today.
There will be plenty of additional economic data out before then, not to mention we’ll be in the heart of Q3 earnings season, but yesterday’s dovish tone from Fed officials may give way to something more hawkish. We’ll also see minutes from the last Fed meeting, where the monetary policy body opted to hold pat on its current 5.25-5.50% Fed funds rate, and see details about the Fed’s concerns as of a few weeks ago.
None of this has had a major negative impact on pre-market trading in the major indices this morning. Though we are off early highs, the Dow is still +70 points, the S&P 500 +10, the Nasdaq +55 points and the small-cap Russell 2000 — the biggest gainer over the past week — is +2 points.
Questions or comments about this article and/or author? Click here>>