PPI remains hot at + 0.7%, pre-market indices rebound
Friday, September 10, 2021
We’re ending this shortened Labor Day trading week, which has been relatively light on earnings announcements and economic readings, with a pretty big character: the Producer price index (PPI) for August. The overall figure rose 10 basis points higher than expected to + 0.7%, down slightly from the + 1.0% reported for July. Our record in this series was back in January of this year, + 1.2%.
Non-food and energy products – the “base” reading, which excludes short-term volatility – reached + 0.6%, down from + 1.0% the previous month, which was the highest in history from the Serie. It should be noted here that these numbers only date back to 2009, when the PPI was recalibrated to provide more accurate readings. Activities excluding food, energy and commerce reached + 0.3% last month, compared to + 0.9% in July.
Year-over-year final demand is + 8.3%, a new high, surpassing the previous July high of + 7.8%. Ex-food & energy is a historic record of + 6.7%, as does ex-food, energy & trade print of + 6.3%. Both figures follow previous all-time highs (through 2009) of + 6.2% and + 6.1%, respectively. Next week we will be looking at the final request for the Consumer Price Index (CPI), expected at + 0.5%, against + 0.3% in July.
What we see from these numbers, as well as the PPI chart over the past couple of years, is that suppliers of goods and services have been able to raise prices at higher rates than they did. we have seen them for over a decade. In fact, the upward trajectory, which has been more or less constant (except for the start and middle of the pandemic period and a few other small ups and downs) is at a higher level than before the pandemic.
This is the sort of thing the Fed may want to take a closer look at. The PPI helps transform the US economy into an economy with higher inflation than we have seen for a very long time. Meanwhile, we are still inundated with liquidity, with the Fed supporting our economy to the tune of $ 120 billion in asset purchases per month. Maybe economic impressions like this will help the Fed get out of its current policy of saving us from deflation.
Currently, we are seeing bargain buys in pre-market indices: the Dow Jones is +175 points, the S&P 500 is +20, and the Nasdaq is +60. Despite the trading difficulties so far in September, each of these indexes remains around 1% of its record closing highs. We’ll see if the Delta variant and the difficulties in the supply chain prompt the Fed to keep current policies intact, but lately our flow of economic measures indicates that the grand reopening continues.
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