Producer Price data (prices received by domestic producers) for July was higher than forecast in 5 of the 6 PPI categories: monthly Final Demand monthly +0.3% vs. +0.2%; Ex Food and Energy monthly +0.3% vs. +0.2% est.; Final Demand year-over-year +0.8% vs. +0.7% est.; and Ex Food and Energy YoY +2.4% vs. +2.3% est. And all PPI categories for July were higher than June’s report with the YoY Final Demand of 0.8% far outpacing June’s 0.1% increase.
Not great news for the Fed and counter to the ‘soft landing’ narrative. Equities have dropped following the PPI data, with an increased likelihood of further rate increases creating headwinds for businesses and pressuring bank portfolios. Treasuries have reacted to PPI as well, with prices lower in all tenors leading to yield gains, particularly in the 3- 6-year periods.
The U.S. dollar is stronger today as it follows higher yields. The widest gains are +1.31% vs. NOK, +1.17% vs. SEK, and +0.53% vs. NZD. The U.S. Dollar Index is +0.24% at 102.774, approaching July’s 102.843 high.
