In an inauspicious development, US producer prices rose more than expected in September, data released on Wednesday showed.
PPI prices increased 0.5% MoM, well ahead of the 0.3% consensus and near the top-end of the range.
Estimates varied from 0.1% to 0.6%. The figures were released a day ahead of the CPI update for last month.
On a YoY basis, PPI rose 2.2%. That was easily ahead of consensus. Core PPI rose an even brisker 2.7% from the same month a year ago. The ex-trade services print, at 2.8%, was cooler than expected.
The overshoot on the MoM print was attributable to the goods index, which rose 0.9% from August. The services gauge rose a more pedestrian 0.3%. Around three-quarters of the increase on the goods side came from a 3.3% jump in energy. Notably, the foods gauge rose the most on a MoM basis since November.
Although the warm headline readings were unwelcome, they probably won’t move the needle much in the absence of follow-through from CPI on Thursday. The Fed (sans Bowman, anyway) seems to be coalescing around the idea that the recent increase in the term premium, and the sharp rise in real yields since July, can substitute for the final rate hike tipped by the dot plot.
Nothing in the PPI figures was sufficient to override the Fedspeak or alter expectations for CPI. The FOMC minutes, due later Wednesday, are perhaps stale given the very recent evolution of policymakers’ rhetoric and the extent to which the rates repricing since last month’s policy gathering has tightened financial conditions.
I wouldn’t want to give PPI short shrift, exactly, but in the context of the flight-to-quality trade triggered by events in the Middle East, Fedspeak and the looming CPI release, its relevance was questionable.
