Ahead of tomorrow's CPI, traders are eyeing this morning's Producer Prices for any hints that the disinflation trend will return...or not.
The answer is "not!"
April Producer Prices rose 0.5% MoM (vs +0.3% exp), with March's +0.2% MoM revised down to -0.1% MoM. The downward revision did not stop the YoY read rising to 2.2% (from +2.1% in March)...
Source: Bloomberg
This is the highest YoY read since April 2023 and is the fourth hotter than expected headline PPI print...
Source: Bloomberg
Producer Prices have been aggressively downwardly revised for 4 of the last 7 months...
Source: Bloomberg
Services costs soared, dominating April's PPI gains with Energy the second most important factor. Food prices actually declined on a MoM basis.
Source: Bloomberg
On a YoY basis, headline PPI's rise was dominated by Services (rising at their hottest since July 2023). For the first time since Feb 2023, none of the underlying factors were negative on a YoY basis...
Source: Bloomberg
After last month's farcical 'seasonally adjusted' gasoline price, April saw the PPI Gasoline index rise (with actual prices at the pump) but still has a long way to go...
Source: Bloomberg
Core PPI was worse - rising 0.5% MoM (more than double the +0.2% MoM expected) - which pushed the Core PPI YoY up to +2.4%...
Source: Bloomberg
And finally US PPI Final Demand Less Foods Energy and Trade Services rose by 0.4% MoM and 3.1% YoY (the highest in 12 months).
Worse still the pipeline for primary PPI is not good as intermediate demand is starting to accelerate...
Source: Bloomberg
So, no, The Fed does not have inflation under control.
