Monthly Producer Prices (final demand output) for July were +0.1%, below the +0.2% estimate. The Services sector portion of PPI was -0.2%, led by a 5.7% drop in retail fuels and lubricants, a 3.7% decline in foods and alcohol retailing, a 2.4% decline in automobiles and automobile parts, and a 1.9% decline in loan services. Price increases were seen in portfolio management (+2.3%) and securities brokerage and investment advice (+1.8%). In a nutshell, producers are having to charge less for food, cars, and loans, but can charge more for investment portfolio management and advice as consumers shift attention from spending to capital preservation.
The dollar is lower today, leading to a 0.20% drop in the U.S. Dollar Index. The primary dollar spot losses are -0.70% vs. NZD, -0.60% vs. MXN, -0.51% vs. ZAR, -0.38% vs. GBP, -0.30% vs. SGD, and -0.24% vs. EUR.
The dollar began its decline today following the release of the UK’s jobs data and surprise drop in the unemployment rate to 4.2% from the previous 4.4%. The positive labor report lifted the GBP at the expense of the dollar. Dollar losses accelerated following the lower-than-forecast U.S. PPI report.
U.S. treasury yields are lower in all tenors with the short dates leading the way lower. The 2-year yield is -0.059% followed closely by -0.046% in the 10-year.
Spot gold prices closed at $2,472.25/oz yesterday, a record high. Gold is +19.80% for the year followed closely by silver’s 16.32% gain.
Tomorrow’s CPI data release (8:30am ET) for July is the key economic report for the week with potential to drive market volatility if there are any surprises. Monthly headline CPI is forecast 0.2% and 3.0% year-over-year.
