Latest / Markets with Megan: A Quick Financial Markets Update / Deciphering April's Producer Price Index | Episode 133 | 05-14-24

Transcript

Deciphering April's Producer Price Index | Episode 133 | 05-14-24 · Markets with Megan: A Quick Financial Markets Update

• 0:03
  Megan Horneman: Well, it's just another bad inflation report that we got this morning.
• 0:07
  Megan Horneman: Hello, this is Markets with Megan.
• 0:09
  Megan Horneman: It is Tuesday, may the 14th, and coming to you to give you some information about the producer price index that we got for the month of April.
• 0:17
  Megan Horneman: We talked about this yesterday that we'd get a lot of inflation data this week.
• 0:21
  Megan Horneman: We kicked it off this morning with producer price index.
• 0:24
  Megan Horneman: We'll get a consumer price index tomorrow.
• 0:27
  Megan Horneman: The producer price index is the cost that the producers have to incur.
• 0:31
  Megan Horneman: It's not surprising that these numbers came in higher than expected, because we've seen some other pricing pressures in things like ISM, manufacturing costs and service costs, and this is now translating into the producer side of things.
• 0:45
  Megan Horneman: Let's just dig into the data that we got.
• 0:47
  Megan Horneman: So there was on the headline.
• 0:50
  Megan Horneman: There's a lot of different ways that producer prices are reported.
• 0:54
  Megan Horneman: They exclude food and energy.
• 0:55
  Megan Horneman: Then they also exclude food, energy and trade.
• 0:58
  Megan Horneman: All of these came in slightly higher than expected on a month over month basis.
• 1:03
  Megan Horneman: There were some downward revisions at the headline level and then excluding food and energy from the prior month.
• 1:12
  Megan Horneman: I'm not focused about that.
• 1:14
  Megan Horneman: What I think the Fed needs to be focused about is if you look at the PPI, which excludes food, energy and trade.
• 1:21
  Megan Horneman: On a year-over-year basis that jumped from 2.8% up to 3.1%.
• 1:26
  Megan Horneman: It's the highest we've seen in a year and it is clear to us and I really hope it gets clear to the Federal Reserve that inflation is going the wrong way.
• 1:35
  Megan Horneman: They have to stop the dovish rhetoric.
• 1:37
  Megan Horneman: We'll get some Powell speak today.
• 1:39
  Megan Horneman: I'm not sure if he'll address this or if he'll simply glide this over, saying that it's going in the right direction, but last time I checked we're moving higher.
• 1:47
  Megan Horneman: So again, this is a problem.
• 1:48
  Megan Horneman: The Fed needs to address it.
• 1:50
  Megan Horneman: Underlying within this report, when you look at it, it was services, and services is what the Fed has said is a sticky inflation indicator.
• 2:00
  Megan Horneman: Now we'll be back tomorrow with what we think gets a little bit more market reaction with the consumer price index, but it's also going to come alongside with the retail sales data.
• 2:10
  Megan Horneman: So what are we seeing from the consumer?
• 2:13
  Megan Horneman: We've seen a big weakness in consumer sentiment.
• 2:15
  Megan Horneman: Is that finally spilling over into sales?
• 2:18
  Megan Horneman: We've had some mixed reports from different retail earnings, so are we going to see that filtered into this monthly data?
• 2:25
  Megan Horneman: Keep in mind, this monthly data is also not inflation adjusted and we know that the price of gasoline has been a big portion of the increase, so we may see the headline number jump up.
• 2:35
  Megan Horneman: We'll focus more on excluding out all of those volatile items like food, energy, building materials and we'll be back to focus on that tomorrow.
• 2:44
  Megan Horneman: So we'll be back tomorrow.
• 2:45
  Megan Horneman: Lots of information this week.
• 2:47
  Megan Horneman: If you have any questions or comments, please feel free to reach out at podcasts@V erdence.
• 2:50
  Megan Horneman: com.
• 2:51
  Megan Horneman: Thank you.