Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 
  The Producer Price Index Increased 0.4% in May
Posted Under: Data Watch • Inflation • PPI

 

Implications:  Blame it on the May jobs report, blame it on uncertainty surrounding the Brexit vote. Either way, the Fed will likely stand pat on rates at today's meeting. But this morning's report on producer prices says they shouldn't.  Combined with retail sales data, today's PPI data suggest a July hike is very likely. After pulling down the index for a long time, energy prices rose 2.8% in May, leading the index higher. Oil prices have fallen slightly in June, but we do not expect another large decline.  Goods prices (which include energy) rose 0.7% in May, the largest monthly gain in a year, while service prices ticked up 0.2%, led by increased margins to wholesalers and retailers.  As a result, the headline measure of inflation rose 0.4% in May and is showing acceleration towards the Fed's 2% target, up at a 1.8% annual rate in the past three months compared to a 0.7% annual rate in the past six months and no change in the past year.  While the Fed pays attention to overall prices, they place greater weight on "core" prices, which exclude the volatile food and energy components.  The "core" measure for producer prices rose 0.3% in May, and these prices are now up 1.2% in the past year.  So while inflation remains modest, the U.S. is not experiencing deflation, and rising energy prices may push inflation up at a faster pace than many are expecting.  With energy prices stable to higher, expect the employment report on July 8th to be the major factor determining if the Fed raises rates at their July meeting.

Click here for PDF version

Posted on Wednesday, June 15, 2016 @ 10:19 AM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
Home |  Important Legal Information |  Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2019 All rights reserved.