Wholesale price inflation is cooling, buoying markets
Another week, another round of weaker-than-expected inflation data.
The big picture: Finally, official data is showing a clearer inflation peak in the rearview. Judging from the market response, investors want to believe it's not just another head-fake.
- Check out the chart above. Wholesale goods prices, as measured by the Producer Price Index (PPI), have stopped climbing at the breakneck pace they hit earlier this year.
Go deeper: The chart measures “core” prices, which exclude volatile food and energy — and these prices on average actually moved lower in October compared to the month before.
- Even including food and energy, the total rate of growth for goods and services is also way down from a June peak of 0.9% — the increase was 0.2% in each of the last two months.
- On a year-over-over basis, the headline PPI grew 8% — still uncomfortably high, but down from the 11%-plus levels seen in March through June of this year.
The impact: Stocks continued a rally kicked off by last week's cooling Consumer Price Index (CPI) release.
- The S&P 500 gained nearly 1% Tuesday, and the Nasdaq composite was up 1.45%.
What to watch: These wholesale price movements are usually an early indicator of consumer price trends. We'll have to wait until Dec. 13 for the next CPI release.