Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Bio
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
Bio
X •  LinkedIn
 
  The Producer Price Index Increased 0.3% in June
Posted Under: Data Watch • Inflation • PPI
Supporting Image for Blog Post

 

Implications:  Through the first half of 2018, producer prices rose at the fastest pace to start a year since 2011.  And, at 3.4%, the increase in producer prices over the past year stands well above the Fed's 2% inflation target (for comparison, producer prices rose 1.9% in the twelve months ending June 2017 and 0.2% in the twelve months ending June 2016).  While ever-volatile food and energy prices continue to play a role, stripping out those components still shows "core" prices up 2.8% in the past year.  No matter how you cut it, inflation has the Fed on notice.  And with our expectation of two more hikes this year (for a total of four in 2018) now the consensus – and Fed - expectation, the sights are set on 2019, where we expect to see another four rate hikes.  Taking a look at the details of today's report shows producer prices rose 0.3% in June on the back of May's hefty 0.5% increase – tied for the largest monthly jump in more than five years.  "Core" prices rose 0.3% in June, with the increase in core prices led by trade services (think margins to wholesalers). Given the elevated levels of order backlogs reported by both manufacturing and service sector firms in the ISM reports, we expect this trend to continue in the months to come until firms can either increase capacity or find qualified workers to fill positions – a task that has become increasingly difficult in a tight labor market.  A look further down the pipeline also suggests rising inflation to come.  Intermediate processed goods rose 0.7% in June, and are up 6.8% from a year ago, while unprocessed goods prices declined 1.0% in June but remain up 5.8% in the past year.  In short, neither inflation nor employment – the two components of the Fed's dual mandate - give the Fed any reason to slow down the pace of raising rates.  Monetary policy isn't close to being tight, and steady, gradual hikes this year and next won't change that. 

Click here for PDF version

Posted on Wednesday, July 11, 2018 @ 10:05 AM • Post Link 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 professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.