Live PPI report: Producer Price Index data is out and here’s what it shows
Originally Posted: 09/14/2022 08:30 ET
Updated: 09/14/2022 08:49 ET
The release of August CPI (consumer price index) data this week shocked the stock market. Whether you are trading penny stocks are not, the impact has been felt in almost every industry. Searing inflation was the topic of discussion and what the Federal Reserve might do at its upcoming September meeting next week.
Given that the CPI beat expectations, the next round of PPI data didn’t hold high hopes from stock market traders today. Nonetheless, this article breaks down the latest live PPI report and highlights some important details to consider. First, let’s go over some of the basics for those who may not be familiar and asking questions like:
- What is PPI data?
- Why is PPI data important for the stock market today?
- How can PPI data be used in your investment and trading strategy? ; and finally
- What are the results of the August PPI report?
What is the PPI and the PPI report?
According to the US Bureau of Labor Statistics, the Producer Price Index or PPI measures “the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are those of the first commercial transaction for many products and certain services.
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PPI vs CPI: why is PPI important?
The PPI is important because it can serve as another data point for investors to understand future inflation and the potential rationale for adopting monetary policy. Unlike CPI data, producer prices provide a picture of the prism of companies producing end products, their input costs, and whether the prices can trigger an increase or decrease in overall retail costs for consumers.
July PPI report
Before the August PPI data is released, it is important to note what happened in the July PPI report to understand where we were and where we are heading. The producer price index for final demand fell 0.5% in July. Prices for final demand goods fell 1.8% and the final demand services index rose 0.1%. Final demand prices rose 9.8% for the 12 months to July.
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In particular, energy was a key factor in July. According to the Bureau report, “More than half of July’s decline in unprocessed goods prices for intermediate demand can be attributed to a 27.6% decline in the natural gas index. Prices for crude oil, grain, scrap metal, oilseeds and non-ferrous metal ores also fell.
August PPI Release Expectations
Let’s look at the PPI and Core PPI expectations for August. The year-over-year PPI forecast for August is set at 8.8%. This would be lower than July’s PPI of 9.8%. The Core PPI should reach 7.1% for August and would be slightly lower than July’s 7.6%.
Producer Price Index Report for August 2022 and PPI Figures
The producer price index for final demand fell 0.1% in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices fell 0.4% in July and rose 1.0% in June. On an unadjusted basis, the final demand index rose 8.7% for the 12 months to August.
Final demand prices less food, energy and commercial services rose 0.2% in August after rising 0.1% in July. For the 12 months ending in August, the final demand index less food, energy and commercial services rose 5.6%.
Points to remember from the PPI data key
- The PPI, on an unadjusted basis, the final demand index rose 8.7% for the 12 months to August. Within intermediate demand in August, processed product prices fell 1.7%.
- The unprocessed goods index increased by 5.7%
- Prices for services rose 1.0%.
- The unprocessed goods index for intermediate demand rose 5.7% in August and was the strongest gain since February’s 9.8% increase.
- Leading the rise in prices of unprocessed goods for intermediate demand in August, the natural gas index jumped 35.3%.
- Much of August’s decline was attributable to a 5.2% drop in prices for processed energy goods.
- The index for processed materials less food and energy fell 0.8%.
- Prices for processed food and animal feed edged up 0.1%.
- Leading the August increase, the prices of unprocessed energy materials climbed 13.5%.
- The index for unprocessed non-food materials minus energy rose 1.0%.
- 30% of August’s rise in the intermediate demand services index was attributable to a 5.5% rise in non-residential real estate rental prices.
- Prices for warehousing, storage and related services fell 5.3%.
The stock market today
Thanks to the latest round of PPI data released for August, the indices have been popping up in the stock market today. Major ETFs including the S&P 500 (NYSEARCA:SPY), Nasdaq (NASDAQ:QQQ) and Dow (NYSEARCA:DIA) all jumped following the PPI report. Although not as high as Tuesday’s, the more bullish sentiment based on the PPI data was felt during the pre-market hours. Even the Russell 2000 ETF (NYSEARCA:IWM) climbed higher and back above the $182 mark.
Natural gas was also the center of attention. The ProShares Ultra Nat Gas ETF (NYSE:BOIL) hit highs near $90 in Wednesday’s premarket session.
Takeaways from the August PPI and where to focus next
With the PPI data being softer than expected, some are hoping this will be September’s CPI leading indicator as producer prices appear to have fallen. For that, you will have to wait for the next IPC report which will be released on October 13, 2022 at 8:30 am ET.
Where should investors focus next? There are still several economic events in the stock market this week, including tomorrow’s employment and retail sales data. Expectations for continued jobless claims are pegged at 1.475 million, while jobless claims pegged at 226,000. Both expectations are higher than previous readings for the double digits. Meanwhile, core retail sales for August are expected to post a 0.1% increase. That’s much lighter than the previous reading of 0.4%.
Now that PPI and CPI data are available, investors continue to look ahead to next week. September 20-21 will be the next FOMC meeting and where new policy updates will be given. The market is pricing in a rate hike of at least 75 basis points, but some are eyeing the 100 basis point figure after the latest round of CPI data.
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