Customers look over clothes gadgets displayed on April 18, 2025 at a Costco department in Niantic, Connecticut.
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The producer value index, a gauge of prices on the wholesale degree within the U.S. financial system, posted an unexpected 0.1% decline in August. Here’s what to know:
- For the third time this yr, the PPI confirmed outright deflation in what is mostly thought of a measure of pipeline value pressures. Wall Street economists had been on the lookout for a 0.3% enhance. The core PPI, which strips out meals and power, additionally fell 0.1% although core minus commerce providers truly rose 0.3%
- The tame studying will solely feed market expectations of a Federal Reserve fee minimize subsequent week, and President Donald Trump was shortly on the case. “Just out: No Inflation!!! ‘Too Late’ must lower the RATE, BIG, right now. Powell is a total disaster, who doesn’t have a clue!!!” he posted on Truth Social in his newest shot at Fed Chair Jerome Powell.
- Despite the tame inflation and close to certainty of a fee minimize, market reaction was muted. Stocks rose barely and Treasury yields moved solely modestly decrease. The PPI is mostly not thought of a high-profile or well-understood metric, and merchants are doubtless ready for the buyer value index print Thursday.
- Fed officers look not solely at headline numbers but in addition the underlying drivers. The PPI report offered excellent news on inflation fundamentals. The providers sector, which drives some 80% of GDP, noticed outright deflation, falling 0.2%. Even items costs, that are far more closely impacted by tariffs, rose simply 0.1%.
- The CPI studying, due Thursday at 8:30 a.m. ET, will get extra consideration. As with the PPI, the consensus outlook is for a 0.3% enhance. About four-fifths of the CPI and PPI numbers feed into the Fed’s most popular inflation gauge, the non-public consumption expenditures value index. The CPI is the ultimate huge knowledge level earlier than the Fed’s fee determination per week from now.
What they’re saying:
“Tomorrow’s CPI will carry more weight, but today’s PPI print essentially rolled out the red carpet for a Fed rate cut next week. After last week’s jobs report, though, the market was already expecting the Fed to begin an easing cycle, so it remains to be seen how much of a near-term impact this will have on sentiment” — Chris Larkin, managing director, buying and selling and investing, E-Trade from Morgan Stanley.
“The worst-case scenario on inflation isn’t playing out. The doves will be happy to see the year-over-year number back below 3 percent. Combined with the weak jobs data recently, this keeps us on track for rate cuts. However the speed and intensity might depend more on the big consumer index tomorrow morning.” — David Russell, international head of market technique at TradeStation.
“Inflationary pressure in PPI appears to be muted overall. … We see nothing in this report (or its implications for core PCE) that would dissuade Fed officials from cutting 25bp in September and proceeding to cut 25bp at each upcoming policy meeting.” — Citigroup economist Andrew Hollenhorst.