US Producer Inflation Rate PPI Jumps in January
Inflaiton is still being sticky in the US. Last week the CPI Consumer inflation came above expectations for January which gave the USD a boost, while today we are seeing some elevated numbers from the producer inflation rate, showing a 0.9% increse for the month.
US January PPI Inflation Report
- Overall PPI increased by 0.9% compared to the expected 0.6%. The previous month’s figure was revised to +0.8% year-on-year.
- Month-on-month (m/m), PPI rose by 0.3%, surpassing expectations of +0.1%. The prior month recorded a decrease of -0.2%.
- Core PPI measures, which exclude food and energy prices, showed the following:
- Year-on-year (y/y) increase of +2.0%, higher than the anticipated 1.6%. The previous month’s figure stood at 1.8%.
- Month-on-month (m/m) increase of +0.5%, exceeding expectations of +0.1%. In the prior month, core PPI excluding food and energy prices decreased by -0.1%.
- PPI excluding food, energy, and trade services increased by +2.6% year-on-year and by +0.6% month-on-month. The prior month recorded figures of +2.5% (y/y) and +0.2% (m/m) respectively.
The US dollar strengthened by 30 pips after the release of strong Producer Price Index (PPI) data, which added to concerns about inflation. This movement suggests that market participants are reacting to the higher-than-expected inflationary pressures indicated by the PPI report.
The strong PPI data, coupled with previous inflationary signals such as the Consumer Price Index (CPI) earlier in the week, has heightened fears of inflation coming back. Import and export prices also being high further contribute to these concerns. However the possibility of seasonal adjustment issues at the change of the year, could impact the interpretation of the data. It’s essential to consider any potential distortions caused by seasonal adjustments this time of the year when analyzing such economic indicators.
US Bond Rates Turn Higher Too
The release of strong PPI data led to a 5 basis point increase in Treasury rates across the board. This indicates that bond markets are also reacting to the inflationary pressures reflected in the data. Fed fund futures now anticipate 86 basis points in rate cuts this year, down from 96 basis points before the release of the PPI report. This suggests that market expectations for monetary policy may have shifted slightly in response to the inflation data.
There was an initial jump in the US dollar following the PPI data release, but it has stopped now, so there appears to be uncertainty in the market, probably due to the adjustment issue. GOLD has dipped below $2,000 again but there is no follow through at the moment.
Gold Live Chart
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