Market Wrap – PPI Moves lower

Market volatility towards the US dollar ramped up today after the US PPI monthly figures came in weaker than expected, sending Fed hawks scrambling.

Notably, we saw a big move higher in the euro and British pound on the back of the inflation print dropping, which is of course in line with a recent drop in CPI inflation.

Gold looked past the news, however, stocks clearly loved the news and all three of the major indices, DJIA, S&P500, and the Nasdaq are up by over 1 percent.

The Producer Price Index for final demand in the US rose 0.2% month-over-month in October of 2022, the same as a downwardly revised 0.2% increase in September and below market forecasts of 0.4%.

Goods cost went up 0.6%, the largest advance since a 2.2% rise in June, mainly pushed by a 5.7% jump in gasoline cost. Prices for diesel fuel, fresh and dry vegetables, residential electric power, chicken eggs, and oil field and gas field machinery also advanced.

In contrast, the index for passenger cars declined 1.5%. Meanwhile, services cost fell 0.1%, the first decline since November of 2020. Prices for fuels and lubricants retailing were down 7.7% and prices also moved lower for portfolio management, long-distance motor carrying, automobile retailing, and professional and commercial equipment wholesaling.

In contrast, cost for hospital inpatient care increased 0.8%. Compared to the same month in 2021, producer prices were up 8%, the smallest increase since July last year.

Elsewhere, the NY Empire State Manufacturing Index surged 13.6 points to 4.5 in November 2022, compared with market expectations of -5.0 and pointing to the first month of improvement in the New York State’s business activity since July.

New orders decreased slightly, while shipments expanded modestly. Delivery times were little changed, and inventories grew significantly. Labour market indicators pointed to a solid increase in employment and a longer average workweek.

On the price front, input prices increased at about the same pace as last month, while selling cost rose at faster pace. Looking ahead, firms expect business conditions to worsen over the next six months.