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U.S. PPI Data Confirm Disinflationary Trends

Published 06/14/2023, 10:24 AM
Updated 03/21/2024, 07:45 AM

US producer prices fell stronger than expected, potentially reinforcing the dovish argument at the Fed. For May, PPI declined by 0.3% m/m, more than the expected 0.1%, and the index gained a modest 1.1% y/y after 2.3% a month earlier.

US producer prices fell stronger than expected

The core PPI, which excludes food and energy, added 0.2% m/m and 2.8% y/y. The annual rate was lower than 3.2% a month earlier and the expected 2.9%.

In contrast to the core CPI, the PPI shows a return to desired inflation numbers, with the monthly price growth rate well within the Central Bank target.

Were it not for a strong labor market and the resulting robust consumer demand, the producer price development should have been regarded as a leading indicator for the CPI.

However, in a full employment environment, retailers can use the situation to support their margins by justifying it with increased interest expenses.

Core PPI added 0.2% m/m and 2.8% y/y

The balance between divergent forces could result in a continued downward trajectory of inflation but a longer path towards the 2% target from the Fed.

The FxPro Analyst Team

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