US PPI and unemployment rises - will the Fed get even more aggressive?
Latest economic updates from the USA:
- The initial jobless claims forecast was 235K and the actual reported is 244K.
- PPI (Mom) Jun is 1.1% compared to the forecast of 0.8%
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| latest initial jobless claims and PPI (Mom) June have been announced |
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| PPI of the last few months |
The producer price index (PPI) measures inflation from the perspective of costs to industry or producers of products. Because it measures price changes before they reach consumers, some people see it as an earlier predictor of inflation than the CPI.
CME Group explains the difference between Consumer Price Index (CPI) and PPI in the following:
CPI is a measure of the total value of goods and services consumers have bought over a specified period, while PPI is a measure of inflation from the perspective of producers.
Both CPI and PPI measure the impact of inflation with CPI from the perspective of the consumers and PPI from that of the producers. Thus, PPI is seen as an earlier indicator of inflation than CPI as producers would usually pass these additional costs to the consumers.
My muse
With PPI higher than forecast, we can expect more inflationary pressures exerted on the economy in the coming weeks. Be it the heightened fuel costs, supply chain challenges, extreme weather or various social issues, inflation looks to be more stubborn than the interest rate hikes applied by the Federal Reserve. With the increase in unemployment, the Fed will have the data required to combat both inflation and unemployment. While most are guessing a 75 basis points rate hike at the end of July 2022, we cannot rule out 100 basis points either. It could be a tough summer ahead and let us continue to exercise caution as we invest.
As always, let us spend within our means, invest with what we can afford to lose, and save up cash for crash and research before investing.
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