US PPI above expectations in November-Report
2022.12.09 09:16
US PPI above expectations in November-Report
Budrigannews.com – Although producer prices in the United States increased slightly more than anticipated in November, the underlying trend of inflation is cooling, which may allow the Federal Reserve to slow the rate at which it raises interest rates next week.
The Labor Department reported on Friday that the producer price index for final demand increased by 0.3 percent in the previous month. The PPI increased by 0.3% in October, as opposed to the 0.2% that had been previously reported, according to revised data. After rising by 8.1% in October, the PPI increased by 7.4% through November. The Reuters poll of economists predicted a 0.2% increase in the PPI and a 7.2% increase year-over-year.
STOCKS: decreased by 0.3%, indicating a weak Wall Street opening for bonds: The yield on the bond increased to 3.503%, up one basis point; The yield on the two-year U.S. Treasury increased to 4.319 percent, up 0.7 basis points.
FOREX: The euro saw a slight gain and nearly remained unchanged as the dollar rose.
The strength of the data was broad-based, with ex-food, energy, and trade also topping estimates at 0.3% MoM vs. 0.1% MoM anticipated in an acceleration from last month’s 0.2% MoM print. This brings the YoY pace to 7.4% compared to the forecast for a print of 7.2% and 8.1%. The prior read was revised to 0.3% MoM vs. 0.2% MoM. If we extrapolate this to the year-over-year rate, we see a read of 4.9%, down from 5.4% in October but well above the consensus of 4.7%. The market will be cautious regarding a similar outcome next week when we receive the consumer price update because it was a stronger price reading.
It’s disappointing because it was higher than expected. The markets are now negative rather than positive. It is slightly lower from year to year. It doesn’t mean the world will end. But without a doubt, a bad surprise for the markets.”
It still indicates that inflationary pressures are on the way, which is not good news for the Fed. The annual decline is the most encouraging sign.
The bottom line is that inflation is trending downward, but it is rising faster than anticipated month by month. The monthly topline is always looked at by markets.
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The Federal Reserve is aware that the progress they’ve made thus far will take time to show results. Because of the lag effect, I don’t believe it will sway them from their path of 50 basis points more next week.
“It will be 50 basis points next week, followed by another 50 basis points at the end of February, after which, hopefully, inflation will begin to show some cooling. After that, I anticipate a 25-basis-point increase in March, after which they will hold firm to see how all of these rate increases have played out unless something extraordinary occurs. That appears to be the Fed’s current glide path.
