U.S. Producer Price Inflation, Like Yesterday’s CPI, Undershot Expectations

August 11, 2022

The dollar fell overnight by 0.6% relative to the yen and kiwi, 0.4% versus the Swiss franc, euro and weighted DXY index, and 0.3% vis-a-vis the Mexican peso and Australian dollar.

U.S. stock futures are up 0.8%, and the 10-year Treasury yield has dropped five basis points, which is more than other ten-year sovereign debt yields.

Equity markets in the Pacific Rim, where Japan was closed for Mountain Day, closed up 2.4% in Hong Kong, 1.6% in China, 1.7% in South Korea, 1.7% in Taiwan and 1.1% in Australia. Continental European stock markets have risen modestly, but the British Ftse weakened half a percent.

The price of Bitcoin enjoyed another well-bid session, climbing 3.0% so far. WTI oil has risen 1.4%, and gold is little changed.

Thursday’s main event has been the release of U.S. July producer prices, which recorded a monthly decline of 0.5%, their first such drop in over two years. Producer price inflation as a result slowed to 9.8% from 11.3% in June, 11.7% in March, and 8.0% in July 2021. 9.8% was the first sub-10% PPI inflation result since November and constitutes a 9-month low. Core PPI inflation, which excludes food, energy and trade, fell to 5.8% from 6.4% in June 7.1% in March and 6.0% in July 2021.

Among other price data reported today, Irish consumer price inflation held steady at June’s 38-year high of 9.1% in July and was up from 2.2% a year earlier.

Romanian CPI inflation dipped to a two-month low of 14.96% in July. That triple its year-earlier pace of 4.95%.

Namibian CPI inflation accelerated 0.8 percentage points to a 64-month high of 6.8% in July versus 4.0% a year earlier.

Singapore’s current account surplus of SGD 27.5 billion last quarter was similar to the size of the surpluses in the first quarter of this year and the second quarter of 2021. Singapore GDP growth in 2Q 2022 was revised lower to show a quarterly 0.2% slide and a year-on-year advance of 4.4%.

Turkey experienced similar first-half current account deficits of $13.4 billion this year and $13.8 billion in 2021.

Whether or not global and U.S. inflation is at a tipping point remains to be seen, but central bankers aren’t waiting around to learn that answer. The National Bank of Serbia today agreed to raise its policy rate by 25 basis points to a 3-year high of 3.0%. The move follows four earlier consecutive increases of 50 basis in April, May  and June followed by a 25-basis point increase in July. Serbian CPI inflation climbed to a 9-year high of 11.9% in June from 3.3% in mid-2021 and is expected to crest somewhat further in the immediate future. “Depending on global geopolitical situation and the movement of key monetary and macroeconomic factors in the domestic and international environment going forward, the NBS will assess whether there is a need for additional tightening of monetary conditions. Delivering price and financial stability in the medium term remains the NBS’s monetary policy priority.”

The Covid-19 infection keeps chugging away, albeit with considerably less media attention than before. The global infection and death tolls are approaching the 600 million and 6.5 million milestones. In the United States, there were 175k new infections reported yesterday. Deaths are hovering near 500 per day, and hospitalizations for the disease still exceed 40,000.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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