The producer price index (PPI) was not just soft in May, it went negative for the month, 0.3 percentage points below the Bloomberg consensus expectation.
The Bloomberg Econoday consensus for the Producer Price Index was +0.1 percent.
The Fed will be pleased that the BLS reports the PPI for May is -0.2 with all the key readings flat to negative for the month.
PPI Final Demand Month Over Month
- Overall: -0.2 Percent
- Goods: -0.8 Percent
- Services: -0.1 Percent
- Food: 0.0 Percent
- Excluding Food and Energy: 0.0 Percent
PPI Details
- Final demand goods: Prices for final demand goods fell 0.8 percent in May, the largest decline since moving down 1.2 percent in October 2023. Leading the May decrease, the index for final demand energy dropped 4.8 percent. Prices for final demand foods edged down 0.1 percent.
- The index for final demand goods less foods and energy advanced 0.3 percent.
- Nearly 60 percent of the May decrease in the index for final demand goods can be
traced to a 7.1-percent decline in prices for gasoline. - Final demand services: Prices for final demand services were unchanged in May after increasing 0.6 percent in April.
- In May, the indexes for final demand trade services and for final demand services less trade, transportation, and warehousing rose 0.2 percent and 0.1 percent, respectively. Prices for final demand transportation and warehousing services fell 1.4 percent.
PPI Final Demand Year-Over-Year
Year-Over Year Details
- Final Demand: +2.2 Percent
- Final Demand Goods: +1.6 Percent
- Final Demand Services: +2.6
Services impacts the PPI more than goods. It’s the services number the Fed will pay attention to the most.
Right now, services are mostly in a holding pattern. However, the Fed will be pleased with the report given the month-over-month readings are zero or negative across the board.
The CPI is Flat for the Month, but Rent is Up Big Again
Yesterday, I noted The CPI is Flat for the Month, but Rent is Up Big Again
The CPI report was softer than consensus expectations as well. I called the number on the nose, but not the way we got there.
Owners’ Equivalent Rent and Rent of Primary residence were each up another 0.4 percent in May.
That marks the 33rd consecutive increase of at least 0.4 percent for both.
I expected a flat CPI this month with rent and OER pulling back a bit. Had they fallen, we would have had a negative CPI.
At some point this year, I believe rent will abate. If not, the Fed is going to have one heck of a time bringing down the year-over-year CPI currently 3.3 percent.
The Fed Eyes Just One Interest Rate Cut This Year, Totally Confused About 2025
The Fed FOMC meeting was yesterday. I commented The Fed Eyes Just One Interest Rate Cut This Year, Totally Confused About 2025
I will take the over. A July cut seems unlikely, but it’s possible. If so, look for cuts in July, September, and a third one in December.
If there is no cut in July, I will go for September and December although three cuts are possible given the Fed meets shortly after the election in November.
The data is deteriorating much faster than economists and the Fed realize, except for a Bizarro Jobs Report for May – Payrolls Rise 272,000 Employment Drop 408,000
Payrolls vs Employment Gains Since May 2023
- Nonfarm Payrolls: 2,756,000
- Employment Level: +376,000
- Full-Time Employment: -1,163,000
In the last year, jobs are up 2.8 million while full-time employment is down 1.2 million.
To repeat, I think the Fed will get in 2-3 rate cuts this year with the consensus at 1.
Corrupt people in the Biden administration are rigging CPI and PPI to win the election. They are trying to get the Fed to lower.
Its too bad that Mish and so many other wall street strategists based their entire careers (and retirement hobbies) on reading the tea leaves of government surveys that may have been useful in the past, but are now just a giant steaming pile of turd.
Don’t know if Mish is right or wrong on the specific details, but the way PPI, CPI, NFP and unemployment numbers are tallied by corrupt career bureaucrats makes the summary statistics absolute rubbish. They count the wrong stuff, they omit key portions of the economy, the category definitions were designed for a 1950s economy, and worst of all: the bureaucrats doing the collecting have openly expressed contempt for the general public. Garbage in, garbage out — no matter what analysts do or don’t do.
You can generate media interest writing click-bait on the releases, but you can’t get meaningful economic insight.
Someone mentioned that the inverted yield curve might not matter this time for the market because the Fed caused it and not the economy. They are just moving it back. That I don’t know
That someone is a liar trying to deceive, or a fool trying to believe.
Go long bonds? TLT has been ripping. Sounds ominous
A textbook, massive head and shoulders pattern is forming on bond yields. I don’t want rates to go down, but it sure looks like we’re going to see a waterfall as we approach November. That should make bond prices rise accordingly.
It would be better if the Treasury simply put more money in everyone’s bank account.
Better than the Fed’s minions “loaning” money only to those that can prove they don’t need it. “I been rich and I been poor and rich is better.” – Ms Bailey (or something like that).
What is GovLoans.gov?
GovLoans.gov is an online resource to help you find government loans you may be eligible for.
It is not an application for benefits and will not send you free money.
https://www.govloans.gov/
“And Trump took hold of the two middle pillars which supported the temple, and he braced himself against them, one on his right and the other on his left.”
Again, this blog post would not have been created and this discussion would not be necessary if government statistics were released as a 3-month moving average. Government data collection is too inexact to makes sense of small changes like one or two tenths.
I turned to Perplexity to get an overview of this idea. I’m going to send this to my Congresspeople and suggest that a committee be created to further investigate and discuss this idea.
fed will cut to insure biden wins. then they’ll pull the rug out of the CRE and regional banks……….and do what the FED was set up to do originally. crush the regional banks and buy them up for pennies. only been a little over century now for this playbook. the other stuff is eyewash and rubbish for middlebrows and lumpenproles.
.25 o a .50 rate cut won’t do anything significant for the average person trying to get a loan
Liars do figure.
Mish – you talk how often readings get adjusted. Do you expect PPI to be adjusted significantly higher?
“…services flat…”
^^^this^^^ contradicts everything i’ve been seeing all year… it will be revised upward or otherwise tossed on the garbage pile w/ the rest of the gooberment stats that regularly contradict reality.
Are you a producer of services?
both a producer & consumer of services.
Could it be that “this” is reality and what you think you have been seeing for months is fake ? De-flation seems more probable for the future than much more in-flation ?
vendor bids & invoices are fake?
if you say so.
Anecdotal economic evidence has the least value it has ever had imo. If you work with the top 20%, you’ll probably see one thing, but if you cater to the bottom 80%, you might see a very different picture. Imagine being part of the Royal court in France of the 1780’s, and trying to form an opinion about how the peasants are doing based on your own daily experiences…
Please tell us more about the services you provide and how the segment has behaved (for you). Your comment doesn’t tell us enough to make a clear picture imo. For example, I’m a roofer and business is up like 20% in the last 6 months (I am not, only an example).
Don’t worry about jobs. Blinder says they can just start throwing Benjamins at the General Population. For inflation, just print more magic Benjamins.(nota bene : I have a number of German Marks from the Weimar Republic. 100 million. 500 million etc.) Good luck.
The labor force is larger than reported. Real wages are down. The real unemployment is higher. The PPI m/m ex food and energy is zero. Food m/m zero.
WTIC was down in may and June, but it might popup in July.
I noticed an obvious problem within today’s PPI report that shows just how meaningless these economic reports have become.
According to the BLS, which is also wildly overstating monthly job numbers, gasoline prices declined 7.1% MoM and even more laughable, somehow diesel prices declined 24.5% MoM.
Mind you, this is ‘wholesale’ prices, for lack of a better word, for producers.
One need only look at the futures charts for both RBOB and ULSD to call out the BLS for this obviously manipulated inflation report.
Prices for RBOB futures spiked when the front month contract rolled over from March to April (at the end of February).
Prices remained elevated and climbed slightly during the month of March and prices remained high during the entire month of April.
Keep in mind, producers took delivery of RBOB gasoline futures that were settled for delivery in May for prices that were seen and cotnracts settled for delivery in April.
In other words, RBOB futures prices in April were for RBOB gasoline that was delivered to producers in May.
One can also look at the futures chart for ULSD and see the same thing, ULSD prices traded roughly inline with prices during the month of March over the first half of April and then declined slightly over the second half of April.
Refiners also took delivery of ULSD at April prices during the month of May.
To even suggest that gasoline and diesel prices declined 7.1% and 24.5% MoM during the month of May respectively for producers is complete and utter nonsense.
Be that as it may, these two input costs are what prevented PPI from increasing on a YoY and MoM basis in May.
Oddly enough, the BLS revises seasonally adjusted numbers for up to 5 years afte publication.
One can expect these numbers to be revised much higher when enough time has passed and nobody is paying attention.
The Fed will cut because it wants to follow the demands of the powerful, not because of any economic numbers.
Then they’ll go back and justify their decision with cherry-picked numbers, such at this PPI. So yes, after they cut, this will be one of the reasons they give for their “data-driven” approach.
The PPI numbers for May are complete and utter nonsense for the reasons I cited in my comment. It’s nothing but manipulating the data.
if the Fed wanted to cut rates, they would’ve done so by now.
Higher For Longer is the new normal… not sure why people refuse to accept this fact, or at least offer actual, tangible evidence to the contrary.
“demands of the powerful”
Powell has forced Congress/WH/Treasury to finance years of astronomical deficit spending + years of proxy wars @ 5%.
It is quite obvious that the Fed is NOT bending to the “demands of the powerful”. DUH.
Yes to all of the above.
Fed is no longer acting to lead economy via stimulus.
It has returned to its origins as lender of last resort. What a lender of last resort implies is that something in economy has broken so badly that only Fed intervention can turn tide and prevent a tumultuous and catastrophic outcome.
They have forced Banks to build up reserves for quite some time ever since GFC. They backpedaled with Covid. That phase is done. Banking system has cushion of reserves which is there to buffer against adverse lending portfolios.
Fed is back to acting in its legislated capacity as regulator of the Banking system..
Market has not accepted that Fed is not going to intervene at drop of a Hat any longer.
If market rates fall it will be due to weakness in lending and falling demand for money. Not because Fed is pushing rates down artificially.
USD status as primary reserve currency is strengthened by Fed returning to its original charter.
“USD status as primary reserve currency is strengthened…”
Yes. This is the Fed & Powell’s ultimate objective.
The Fed is breaking the euroDollar system. The Fed is repatriating $USD monetary policy. SOFR instead of LIBOR. Higher For Longer instead of ZIRP. Powell is NOT Yellen/Bernanke.
If someone could cite when/where Powell has ever said, “we want to cut/lower rates”, then maybe I’d stop beating this drum… but he’s never said anything like this… ever.
Higher For Longer.
Get used to it.