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US producer inflation eased in July

Khatija Haque - Head of Research & Chief Economist
Published Date: 12 August 2022

 

  • US producer inflation came in well below forecasts in July, with an outright decline of -0.5% m/m compared with a 1.0% m/m increase in June. Similar to the CPI released yesterday, the main driver was declining energy costs last month, with food PPI up 1.0% m/m. Core PPI also came in lower than forecast, rising 0.2% m/m, the slowest monthly increase since February. On an annual basis, PPI declined to 9.8% y/y from 11.3% in June with core PPI easing to 7.6% y/y from 8.4% in June. 
  • Initial jobless claims rose to 262k in the week to 6 August, although the prior week’s figures were revised lower to 248k. Initial claims have risen by 96k since their low in March, when the Fed started to raise rates. Continuing claims also increased and came in higher than expected for the week to 30 July.  The data is seasonally adjusted.   

Today’s Key Economic Data and Events

  • 10:00 UK GDP (Q2) forecast -0.2% q/q and 2.8% y/y
  • 10:00 UK industrial production (June) forecast 1.6% y/y
  • 18:00 US University of Michigan consumer sentiment index (Aug)

Fixed Income

  • San Francisco Fed president Mary Daly added her voice to the chorus of policy makers warning of further rate hikes ahead, despite some softening in inflation data in July. She told Bloomberg that her baseline is a 50bp hike in September but that she was open to 75bp if necessary, and that she anticipates more restrictive monetary policy in 2023.  
  • The yield curve remains inverted but has steepened to -34bp from -50 earlier this week. The 2y yield was little changed overnight but the 10y yield rose 11bp to 2.89%.

FX

  • The USD was weaker against most of the major currencies overnight but is trading firmer this morning. JPY gained 1.8% against the greenback overnight while EUR and GBP gained 0.9%.
  • Commodity currencies also fared well against the USD yesterday, with AUD gaining 1.8% and NZD up 1.7% as bond yields rose.  

Equities

  • US equities saw a volatile session yesterday, opening higher but closing mostly lower, although the DJIA eked out a 0.1% gain on the day. The Nasdaq composite declined -0.6% while the S&P 500 closed -0.1% lower.
  • The Nikkei 225 is trading higher in Asia this morning as it catches up after a holiday but the Hang Seng and Shanghai composite are both lower this morning.
  • Regional markets were mixed yesterday with the ADXGI and the Tadawul ASI gaining 1% and 0.8% respectively, while the DFMGI closed a quarter of a percent lower.  

Commodities

  • Brent was up 2.3% and WTI up 2.6% overnight on supply disruptions, with six oil and gas fields in the Gulf of Mexico shut after a leak at a booster station. Flows are expected to resume today according to Shell, which owns the two affected pipelines.  
  • OPEC downgraded its forecast for global demand by 720k b/d and increased its forecast for non-OPEC supply by 520k b/d, leading to a projected surplus in the oil market in Q3. In contrast, the IEA increased its demand projections yesterday, as higher natural gas prices are pushing refiners and companies to switch to oil, it says.  OPEC’s more bearish demand outlook likely contributed to the decision last week to raise production by just 100k b/d in September.

 

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