US Inflation Unbowed As Producer Prices Accelerate
Anyone hoping for signs of cooler inflation in the US (so, everyone), was disappointed Wednesday, on the eve of another critical CPI report.
Producer prices in the world's largest economy rose 0.4% in September from August (figure below), double consensus.
The range of estimates, from more than four-dozen economists, was -0.4% to 0.4%. So, the actual monthly print matched the highest guess.
The MoM pace of core PPI growth accelerated to the highest since May.
Both goods and services contri
The data clearly demonstrates that we need the FED in their forward guidance, to emphasize demand destruction in vegetables:)
Shouldn’t be a problem. The only thing Americans despise more than reading is vegetables.
Maybe don’t like music too much, either.
The Fed’s aggressive strategy to raise interest rates to reduce inflation hasn’t shown much effect so far, and prices are still rising rapidly.
They say if the economy slows, inflation is bound to slow. They say when consumers and businesses buy less stuff, a decline in demand will force prices to level off or even fall as companies run out of people to sell stuff to.
A good way companies run out of people to sell stuff to is that companies lay off and fire their workers. Hence, if unemployed they don’t spend money.
Well, we see Intel Corp. is planning to fire thousands of workers by the end of the month. A company’s share prices always go up when they announce layoffs and firings, so that’s good news for investors.
I think certain sectors (such as housing construction activity, real-estate) are very much being impacted by the interest rate hikes.
But very hard to create demand destruction in food, for example. Americans may not like vegetables on their plates, may not like to read but they still have to eat. And they still love to drive their cars. So can energy costs go down in a supply constrained environment?
The big issue is that that the US unemployment rate fell to 3.5 percent in September 2022, matching July’s 29-month LOW. Overall labor market conditions in the world’s largest economy remain tight. And it will take more than a few thousand workers to bring that figure up.