The most recent Producer Price Index figures, which quantify inflation at the wholesale level, rose 0.7% in January, exceeding Refinitiv economists' estimates of 0.4% and marking the largest month-to-month increase since this past summer. This data follows the most recent Consumer Price Index data which revealed that prices paid directly by consumer rose 0.5% in January, the highest in three months. Annual inflation was also hotter than expected, only decreasing 0.1% from 6.5% in December to 6.4% in January. These metrics indicate that inflation remains high despite the Fed having increased interest rates eight times in the recent months. The increases in all three benchmarks stem from 1.2% growth in final demand for goods, nearly one third of which can be traced to higher gasoline prices, up 6.2% in January. Separately, and particularly dismaying for consumers, food prices have also risen 10.1% since January, 2022.
Markets dipped following these inflation reports, as increased uncertainty with regard to how long it will take for inflation to cool, along with rising food and gas prices continues to foster uneasiness among investors across all markets. "Both inflation readings this past week point to the stickiness of inflation and the fight isn't over, especially when considering today's PPI reading was the highest month over month increase since early summer", said Mike Loewengart, head of model portfolio construction at Morgan Stanley. "It shouldn't be a surprise to see the market take a deep breather as hopes of a dovish Fed in the coming months fade."
3 comments:
This is an interesting post to read because the general public thinks that the economy is doing so much better, even though it is doing better inflation continues to rise and soon will become a big issue
I think it is still very concerning that inflation is high even though the FED continues with its interest rate hikes. I believe we can expect the FED to continue with their interest rate hikes going forward. I'm not sure if the FED will be able to achieve its ideal "soft landing", but it will be interesting to see how they respond to inflation reports.
Hello Connor,
This post shows really good insight into the current economic issues. For starters, you hit the nail on the head on recent PPI and consumer price numbers as they have both seen an increase in the last year and a half. This can all be traced back to the increase in the money supply within the economy due to the covid-19 pandemic. The reason for the pump of money from the fed was to spike consumer spending in order to keep the macroeconomy afloat.
Overall, you provide interesting numbers and data. Very well done.
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