2023-09-14 16:28:59
Another indicator of US inflation exceeds expectations… and eyes are on the Federal Reserve
In contrast to many positive readings recorded in recent months, the US Producer Price Index, one of the most important measures of inflation in the world’s largest economy, exceeded expectations in August, as prices recorded an increase of 0.7%, compared to the previous month, while they were Economists had previously expected 0.4%.
The US Department of Labor said that the Producer Price Index, which is a measure of what producers of goods and services receive, recorded the largest monthly increase since June 2022. At the annual level, the increase was 1.6%.
Investors’ eyes are now looking to the Federal Reserve’s Federal Open Market Committee (FOMC) decision on interest rates, which is expected to be announced on Wednesday.
The Ministry indicated that the basic index, which excludes highly volatile energy and food prices, rose by 0.2%, as was expected, while the rate of increase compared to the same month last year was 2.1%, which is the lowest annual level since January 2021. With the exclusion of… Food, energy and services trade, the producer price index rose 0.3% compared to last month.
This data comes one day following the Consumer Price Index showed an increase of 0.6% month-on-month and 3.7% compared to last year. After excluding energy and food prices, the core CPI rose 0.3% and 4.3%, respectively.
As was the case with the CPI, the surge in energy prices caused the bulk of pressure on the PPI, as production costs rose as fuel prices rose. The energy price index rose 10.5% in the month, driven by a 20% increase in gasoline prices, according to Labor Department data.
Prices of final goods also rose by 2% in August, the largest monthly rise since June 2022, and services prices also rose by 0.2%.
The rises in various price indices, exceeding expectations, provide more justification for the Federal Reserve to maintain its strict policies, for fear that inflation will return to its rise.
On more than one occasion, Jerome Powell, the head of the bank, affirmed his and his colleagues in the Federal Reserve’s intention to adhere to raising interest until it is certain that the largest wave of inflation the country has witnessed in more than four decades has ended.
Relatedly, data issued by the Ministry of Commerce showed that retail sales rose by 0.6% in August, which was much higher than expectations, which stopped at 0.1%. Excluding auto prices, sales also rose 0.6% versus a 0.4% estimate.
These numbers have not been adjusted for recent inflation data, which indicates that consumers continue to be able to bear high purchasing costs, despite what has been demonstrated over the past weeks of rising prices and increasing levels of debt on credit cards.
The impact of the recent data on the stock and bond markets was limited, as no unusual fluctuations occurred during the first minutes of trading on Thursday.
Futures and forwards prices indicate that the Federal Reserve will likely not raise policy rates next week, with a 0.25% hike at the November meeting, according to CME Group data.
In a third economic report announced on Thursday, America’s initial jobless claims rose slightly to 220,000 in the week ending September 9, according to the Labor Department, which was slightly lower than the Dow Jones estimate of 225,000.
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