Anyone looking to the BLS’s update on wholesale prices for relief following an uncomfortably warm read on consumer price inflation across the world’s largest economy was disappointed Friday. And severely so.
PPI tripled consensus, rising 0.3% in January from December. That matched the highest estimate from more than four-dozen economists who collectively predicted a 0.1% increase.
Market participants spooked by Tuesday’s CPI release thus found no respite in a report that could bode ill for PCE prices later this month.
Excluding food and energy, PPI posted a 0.5% increase, quintuple consensus. The ex-trade services print, a 0.6% gain, was the briskest in a year.
Do note: The overshoot was entirely attributable to the services gauge, which rose 0.6%. On the goods side, indexes for food and energy both fell from December. That won’t be well-received at the Fed, where Jerome Powell’s concerned that services won’t take the baton once the disinflation tailwind from falling goods prices fades.
The 0.6% gain on the services measure counted as the second-quickest month-to-month increase since Russia invaded Ukraine. An outsized portion of that gain was attributable to a very large (2.2%) increase in a gauge of hospital outpatient care. I won’t pretend to know a lot about that, but I assume it can be described as at least somewhat anomalous.
I doubt the nuance will matter, though. Again: Markets were hoping for evidence to suggest CPI was a false alarm. Whatever you want to say about Friday’s PPI release, it wasn’t that. The 12-month gain on the headline index was 0.9%, well above the expected 0.6%, and both core gauges rose more than expected on a YoY basis.
The release was “a troubling print on the inflation front that reinforces the tone set by core-CPI,” BMO’s Ian Lyngen said. The data, he went on, was “disappointing for the Fed’s ability to anchor realized inflation.”
Considered together, CPI, PPI and this week’s big retail sales miss were amenable to “stagflation” spin. If that’s your thing.
Apparently this time is not different when it comes to QT. It’s just taken a lot longer than anyone imagined.
H-Man, so when does sticky inflation go away?
I’m not H but I don’t see the problem going away this year. Companies are not likely to give back their hard won gains, not unless their competitors take the red(?) pill and all go down the rabbit hole at once. I will not bet that way for now. After all, those dandy profits will raise company fundamentals and add value and extra cash for buybacks.
Equity investors seem, not entirely nonplussed, but only mildlyplussed. Maybe we think January seasonal wackiness in both price and spending.
How long can US GDP continue to outperform when China, Japan and Germany (think EU) continue to go the other way? I thought we were in a increasingly tightly connected global economy since the 90’s. Feels like one tugboat trying to pull a fleet of cargo ships.
US is running a big deficit which is effectively $1TR+ annual fiscal stimulus.
The federal US deficit is projected to be $1.5T in 2024.
https://www.msn.com/en-us/money/markets/us-cbo-forecasts-slightly-smaller-15-trillion-deficit-for-2024/ar-BB1hWt3X
Yeah, we’re deep in the hole. We have a huge shortfall denominated in a unit of account which we can create literally at will.