The U.S. Bureau of Labor Statistics announced on Thursday (14th) that the U.S. producer price index (PPI) increased once more in June, up 11.3% from the same period last year, far exceeding market expectations of 10.7% and the revised 10.9% in May. The swelling is so ingrained that it is not easy to eradicate.
The core PPI, which excludes food and energy, rose 8.2% y/y in June, slightly above market expectations of 8.1%, but down from a revised 8.5% in the previous month.
On a monthly basis, the monthly growth rate of PPI in June was 1.1%, higher than the market expectation of 0.8% and the revised value of 0.9%, highlighting the continued inflationary pressure in the overall economy, which may prompt the Federal Reserve (Fed) to actively raise interest rates; however, The monthly growth rate of core PPI in June was 0.4%, lower than market expectations of 0.5% and lower than the revised previous value of 0.6%.
Gasoline prices are the main force to push up
Commodity prices rose 2.4% in June, the sixth straight month of gains, with 50% attributable to higher gasoline prices (up 18.5%); indexes for diesel, electricity, natural gas, vehicles and equipment also rose.
Services prices rose 0.4% in June following a modest increase in May. Among them, 30% is attributable to the increase in the price of food and alcohol; the prices of machinery and equipment wholesale, outpatient clinics, tourists, and room rentals have all increased. Meanwhile, portfolio management prices fell 2.7 percent, while auto retail and long-distance motor transport prices were lower.
Inflation pressure has increased rapidly, and the market estimates that the probability of a 4-digit rate hike in July is still high
Affected by rising energy prices such as gasoline, the U.S. PPI rose unexpectedly in June and approached a record high. Combined with the consumer price index (CPI) data released yesterday, inflationary pressures are getting bigger and bigger. The odds of a 4-yard rate hike (100 basis points) climbed as high as 90% at one point, but have since fallen back to around 60%.
There is still good news in the pessimistic data
Manufacturers are starting to find some respite as commodity prices retreat amid concerns regarding the demand outlook, despite data showing cost pressures persist. Food, industrial raw materials and crude oil prices have all fallen sharply over the past few weeks. Still, household-level inflation may take several months to moderate.
Excluding volatile food and energy, core PPI rose 0.4% m/m in June, missing expectations, while core PPI rose 8.2% y/y, the smallest gain since November last year.
