US PPI Today – What to Expect

US PPI Today – 12th May 2022

Thursday’s producer prices (PPI) data, which reflects the prices U.S. companies receive for their goods and services at the figurative factory door, are released today.

Consensus estimates forecast a sharp deceleration in headline PPI, and a shallower slowdown when stripped of food and energy items.

US stocks are falling after US inflation slowed for the first time since August last year but was still ahead of forecasts.

US CPI rose 8.3% YoY in April, down from 8.5% in March but above the 8.1% that was forecast. The data suggests that elevated consumer prices and the squeeze on households and businesses will persist, fuelling bets of a hawkish Federal Reserve.

Whilst there is a good chance that inflation has peaked, it is not expected to drop away rapidly. Instead, given the breadth of price rises across the economy, combined with higher wages, the picture suggests that elevated inflation is here to stay.

The data supports the Fed’s more hawkish approach after a 50bp rate hike last week and most likely several more to come.

The report from the Labour Department on Wednesday also showed strong underlying inflation pressures at the factory gate, raising doubts that a decline in the cost of goods, excluding food and energy, in March reported in Tuesday’s consumer prices data would be sustainable. Economists expect the U.S. central bank will hike rates by 50 basis points next month, and soon start trimming its asset portfolio.

COVID lockdowns in China mean more supply chain disruptions, which, combined with high oil prices and resilient services demand, point to a long road to get inflation back towards the 2% target.

PPI m/m, Core PPI m/m, and Unemployment Claims will be released today at 15.30 EEST.

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