Latest / Markets with Megan: A Quick Financial Markets Update / Interpreting the Surprising Drop in Producer Price Index | Episode 145 | 06-13-24

Transcript

Interpreting the Surprising Drop in Producer Price Index | Episode 145 | 06-13-24 · Markets with Megan: A Quick Financial Markets Update

• 0:02
  Megan Horneman: We got our second piece of inflation data today.
• 0:04
  Megan Horneman: It's Thursday, june 13th, and this is your regular segment of Markets with Megan this morning.
• 0:09
  Megan Horneman: We got the producer price index, so this follows along typically with the consumer price index and this looks at prices that are paid at the producer level.
• 0:18
  Megan Horneman: This was a Fed-friendly report, as some would say, because the numbers came in lower than expectations At the headline level for the month.
• 0:27
  Megan Horneman: We actually saw the prices decline.
• 0:29
  Megan Horneman: It was the biggest drop we've seen since October and then when you strip out things like food, energy, trade, the indicator came in actually flat, so up 0.0% for the month.
• 0:41
  Megan Horneman: This is a Fed-friendly report because the expectations were for modest increases on a month-over-month basis.
• 0:47
  Megan Horneman: Now let's talk about where this came from.
• 0:50
  Megan Horneman: This was primarily energy, and we know that.
• 0:53
  Megan Horneman: We saw that in the CPI report as well, but a big drop on the energy component.
• 0:58
  Megan Horneman: Now, when we look at these things on a year-over-year basis, we are seeing that at the headline level at 2.2%.
• 1:07
  Megan Horneman: But when you strip out and we kind of call this the super core when you strip out food, energy and trade, it's still growing above 3% on a year-over-year basis.
• 1:16
  Megan Horneman: So it's 3.2%.
• 1:18
  Megan Horneman: And if you look at the revisions to April's data.
• 1:21
  Megan Horneman: On a year-over-year basis, all three of these indicators whether you strip out food, energy or just the headline number, or food, energy and trade all actually were revised higher.
• 1:33
  Megan Horneman: So the Fed's going to pay attention to that.
• 1:35
  Megan Horneman: We still think that this was a Fed-friendly report, but let's keep in mind that they want to see more consistent reports like this before they can commit to any kind of rate cuts.
• 1:45
  Megan Horneman: This year.
• 1:46
  Megan Horneman: The bond market liked this.
• 1:48
  Megan Horneman: We saw 10-year yields fall below 4.3%.
• 1:51
  Megan Horneman: The two-year is at 4.7%, which is actually the lowest level since April.
• 1:56
  Megan Horneman: So bond yields are lower.
• 1:57
  Megan Horneman: That means prices are higher.
• 1:59
  Megan Horneman: The equity market is slightly off today and this has more to do with what's going on in European equity markets than it really does with this individual report.
• 2:04
  Megan Horneman: That's all we off today, and this has more to do with what's going on in European equity markets than it really does with this individual report.
• 2:07
  Megan Horneman: That's all we have today.
• 2:09
  Megan Horneman: We'll be back tomorrow with the final report for the week and that's the University of Michigan Consumer Sentiment Index for the month.
• 2:16
  Megan Horneman: Thanks.
• 2:17
  Megan Horneman: If you have any questions, please feel free to reach out to podcasts at Verdence.
• 2:20
  Megan Horneman: com.