U.S. Producer Prices for February increased 1.6% (biggest increase in 6 months), higher than the 1.2% estimate and a sharp increase from January’s 1.0% pace. All categories of PPI were higher than forecast and 3/5 were higher than January.
February M/M Retail Sales advanced 0.6% (+0.8% estimate), reversing direction from January’s 1.1% decline. Core Retail Sales (excludes automobile and gasoline purchases) were +0.3%, matching the estimate.
U.S. Weekly Initial Jobless Claims were 209k, below the 218k estimate. The prior week’s claims were revised down to 210k from the 217k originally reported.
Today’s data is consistent with recent trends and underscores an ebullient U.S. economy wracked with persistent inflation. Today’s PPI is the last inflation data Fed officials will see before next week’s rate policy meeting. At its January policy meeting the FOMC shifted its stance on rates to an easing bias.
Spot returns for the dollar had been mixed vs. the G10 currencies prior to the PPI, but now the dollar is higher vs. all G10 and majors. The dollar’s primary gains are +0.48% vs. SEK, +0.26% vs. EUR, +0.21% vs. AUD and +0.20% vs. CHF.
U.S. Treasury yields are higher as well, particularly in the mid/long tenors which have all gained at least 0.05%. The 10-year yield is +0.065% at 4.26%, its highest level this month.
