Tuesday, May 14, 2024

Inflation: U.S. Producer Prices Accelerating Higher, Analysts React

From/via ZeroHedge, May 14:

Ahead of tomorrow's CPI, traders are eyeing this morning's Producer Prices for any hints that the disinflation trend will return...or not.

The answer is "not!"

April Producer Prices rose 0.5% MoM (vs +0.3% exp), with March's +0.2% MoM revised down to -0.1% MoM. The downward revision did not stop the YoY read rising to 2.2% (from +2.1% in March)...

Source: Bloomberg

This is the highest YoY read since April 2023 and is the fourth hotter than expected headline PPI print...

....MUCH MORE (chart mania)


Here are Wall Street’s reactions to PPI:

Chris Larkin at E*Trade from Morgan Stanley:

Sticky inflation looked downright stuck this morning after a much hotter-than-expected inflation reading. But with last month’s numbers revised lower, this report may not have been as much of an upside shock as it first appeared to be.
Right or wrong, the CPI tends to have a bigger short-term impact on the markets, so the picture could look much different 24 hours from now. But if the CPI also comes in above expectations, the interest rate picture may be thrown into doubt.

Bespoke Investment Group:

The results of April’s PPI showed a hotter-than-expected m/m reading. That’s the bad news. On a y/y basis, though, the readings were much closer to expectations as March’s report was revised down to negative 0.1% on both a headline and core basis.”

Chris Zaccarelli at Independent Advisor Alliance:

This week is important for markets because they are worried about inflation and this morning’s producer price index hasn’t done anything to assuage those fears.
The most important data release is tomorrow’s CPI print because the Fed’s dual mandate is based on CPI and unemployment, with the former being what the Fed is solely focused on right now.
We believe that the stock market will move higher throughout the year on strong corporate profits and consumer spending, but volatility is likely to spike in the meantime, because the inflation data is going to keep the Fed on edge.

Quincy Krosby at LPL Financial:

Moreover, this report underscores Fed concerns that the path of disinflation has stalled, requiring a higher-for-longer policy stance to combat seemingly entrenched inflation.
An overriding question — and potential dilemma — hovering over markets is whether the broader economic landscape is softening at the same time inflation inches higher, making the Fed’s job increasingly difficult.


Here's the BLS:
Producer Price Index Home : U.S. Bureau of Labor Statistics