Core Producer Price Index (PPI)
Core Producer Price Index (PPI) month-over-month (m/m)
14 Jan 2025, 01:30 PM GMT/ 09: 30 eastern / 08:30 central
The Core Producer Price Index (PPI) month-over-month (m/m) measures the change in the selling prices of goods and services sold by producers, excluding food and energy. It’s a key indicator of inflation and economic health, as it reflects price changes from the perspective of the seller. It is issued by the bureau of labor statistics;
Core PPI vs PPI
The Producer Price Index (PPI) and the Core PPI are both measures of inflation, but they differ in what they include:
- Producer Price Index (PPI) : This index measures the average change over time in the selling prices received by domestic producers for their output. It includes prices for goods and services at various stages of production, from raw materials to finished products. The PPI is often used to gauge inflationary pressures in the production process.
- Core PPI : This index is similar to the PPI but excludes the more volatile categories of food and energy prices. By excluding these categories, the Core PPI provides a more stable view of underlying inflation trends, as food and energy prices can be highly volatile and subject to external factors like weather and geopolitical events.
The Producer Price Index (PPI) and the Core PPI both have significant impacts on financial markets, but in slightly different ways:
Impact of PPI on Financial Markets
- 1. Inflation Indicator: The PPI measures price changes at the producer level, which can signal future inflation trends. Higher PPI readings suggest that producers are facing increased costs, which they may pass on to consumers, leading to higher consumer prices and inflation.
- 2. Interest Rates: Central banks, like the Federal Reserve, monitor the PPI to gauge inflationary pressures. If the PPI is rising, it may prompt the central bank to raise interest rates to curb inflation1.
- 3. Stock Market: Higher PPI readings can lead to concerns about increased production costs and squeezed profit margins, which can negatively impact stock prices. Conversely, lower PPI readings may indicate weaker inflation, potentially boosting stock prices1.
- 4. Bond Yields: Higher inflation expectations driven by a rising PPI can lead to higher bond yields, as investors demand higher returns to compensate for inflation risk.
Impact of Core PPI on Financial Markets
Job creation is a crucial leading indicator of consumer spending, which constitutes a majority of overall economic activity.
Key Points About Non-Farm Payroll
- Job Growth: Reflects the number of jobs added or lost in various sectors such as construction, manufacturing, healthcare, and retail.
- Unemployment Rate: Includes the overall unemployment rate and details by demographics such as gender, race, and age.
- Average Hourly Earnings: Provides data on average hourly earnings, indicating wage trends.
- Market Impact: This report is closely monitored by investors as it can influence financial markets and investor sentiment.
In summary, unemployment claims data is a crucial piece of information for the FOMC as it helps them gauge the current state of the labor market and make informed decisions about monetary policy to support economic stability.
Impact on Financial Markets
- 1. Stable Inflation Indicator: The Core PPI excludes food and energy prices, providing a more stable view of underlying inflation trends. This helps investors and policymakers focus on long-term inflation trends without the volatility of food and energy prices.
- 2. Monetary Policy: Central banks closely watch the Core PPI to make informed decisions about monetary policy. A higher-than-expected Core PPI may indicate rising inflation, leading to potential interest rate hikes.
- 3. Market Reactions: Financial markets react to Core PPI data, as it provides insights into inflation without the noise of volatile food and energy prices. Higher Core PPI readings can signal inflation risks, affecting bond yields and stock prices due to concerns about tighter monetary policy and slower growth.
- 4. Economic Growth: Sustained increases in the Core PPI can lead to higher production costs, which may squeeze profit margins and impact economic growth. Conversely, a decline in the Core PPI may indicate weaker inflation, potentially leading to lower interest rates and stimulating economic growth.
Key information
- Issuer: Bureau of labor statistics;
- Date : 14 Jan 2025, 01:30 PM GMT/ 09: 30 eastern / 08:30 central;
- Core PPI : Previous data: 0.2% forecast data: 0.2%
- PPI: Previous data: 0.4% forecast data: 0.4%
- Expected impact: Lesser than expected inflation will reduce rate cut possibilities, weaken the currency. USD based currency falls, USD quote currency raises, commodity raises, equity market raises, emerging market falls.