Wednesday’s CPI print provided some firepower to the Federal Reserve, suggesting that inflation for certain goods and services may indeed, be transitory. However, Thursday’s producer price index print displayed a vastly different story, one that suggests prices may be a lot more stickier.
According to the Bureau of Labour Statistics, the PPI rose 1% from June, to an annualized 7.8% in July. This marks the sharpest increase on record, and outpaces forecasts by economists polled by Bloomberg calling for a monthly advance of 0.6%. Core PPI, which excludes volatile items such as food and energy, also outpaced expectations and soared to a new record, rising by 1% month-over-month and 6.2% from July 2020.
Producer prices have been on an accelerating trend since the beginning of the year, amid strengthening consumer demand, global supply chain disruptions, and raw material shortages. The sharp jump in input costs, coupled with an upward increase in wages due to labour shortages, have caused inflation to persistently exceed expectations.
The latest figures are a significant divergence from Wednesday’s CPI print, which showed consumer prices rise by a slower pace, boosting the Fed’s narrative that price pressures are only temporary. Now, with producer prices portraying a rather different state of the economy, financial markets will face yet another month of disputes over the relativity of ‘transitory.’
Information for this briefing was found via the Bureau of Labour Statistics. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.