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Bask inflation has increased much more than expected in July, which raises concerns about an inflationary pressures in the economy.
The Bureau of Labor Statistics published the Produce Price Index (PPI) on Thursday for the month of July, which showed an increase of 0.9% compared to the previous month and 3.3% compared to a year ago.
These IPP figures were much warmer than price forecasts increasing by 0.2% on a monthly basis and 2.5% compared to last year which was estimated by economists interviewed by LSEG.
The PPI Core, which excludes volatile components such as food and energy, also increased by 0.9% compared to last month and increased by 3.7% compared to a year ago – well above the LSEG estimates by 0.2% and 2.9%, respectively. The monthly increase of 0.9% of the basic PI has been the highest increase since March 2022.
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The unexpected increase in wholesale prices has aroused concerns about inflation. (David Paul Morris / Bloomberg via Getty Images / Getty Images)
The increase in the PPI title to 3.3% occurs after being initially reported to 2.3% in June and revised slightly to 2.4% with this report. The basic ppi leap at 3.7% occurs after it was only 2.6% in June. The basic title and PPI did not show any monthly prices growth in June before the July increase.
The prices of the services increased by 1.1% in July, which was the highest increase since an increase of 1.3% in March 2022. More than half of the increase in large increase in price for July was attributable to margins for commercial services, which jumped by 2% and measure the variations in margins received by wholesalers and retailers.
The margins for machines and wholesale equipment jumped 3.8% in July, representing approximately 30% of the monthly increase – while financial services, travel accommodation services, automatic retail and freight trucks have also increased.
The prices of goods have displayed their biggest gain since January, up 0.7%, with high increases in vegetables, meat and eggs.
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The surprising increase in the PPI has prompted marketwatchers to reassess the probability of a drop in September by the Fed. (David Paul Morris / Bloomberg via Getty Images / Getty Images)
“The PPI suggests that inflation is not the non-history that some people thought it would be after the impression of the Tuesday IPC,” said Chris Larkin, director general of trading and investments at E * Trade de Morgan Stanley. “This does not slam the door on a drop in September, but on the basis of the initial market reaction, the opening can be a little smaller than it was a few days ago.”
The CEO of Penfed Credit Union, James Schenk, said: “This morning PPI report and the explosive Miss on the high side compared to forecasts will strengthen the Fed’s decision” to wait and see. “”
“Consequently, the markets will have to dig deeply to see the world as it is – not how they want it to be.” Again, criticisms can also challenge the accuracy of the BLS quarterly numbers and forecasts. “
Inflation cools slightly in July compared to the previous month
Unlike the consumer price index (ICC), the producer price index (PPI) excludes imported goods and focuses on internal prices. (Photo of Spencer Platt / Getty Images / Getty Images)
Chris Zaccarelli, investment director for Northlight Asset Management, noted that the Federal Reserve will receive more inflation data – including IPP and IPC as well as the inflation index of the PCE – as well as another employment report before its next interest rate decision in mid -September, but said that it could reduce optimism around the subject of a rate drop.
“The big peak of the producer’s price index (PPI) shows this morning that inflation reaches through the economy, even if consumers have not yet been felt by consumers. Given the benign way of IPC figures on Tuesday, it is a most undesirable surprise for the rise and is likely to relax a part of the optimism of a price” Guaranteed “, said Zaccalelli.
The market reacted to the hotter than expected PPI report by bringing its prospects for the size and probability that the Fed reduced interest rates on September 17.
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The probability that the Fed leaves the rate of federal reference funds unchanged at the current beach of 4.25% to 4.5% increased to 7.5% from Thursday morning, against 0% per day, according to the CME Fedwatch tool.
The probability of a decrease of 50 base points increased from 5.7% yesterday to 0% after the report, while the chances of a drop of 25 basic points rose from 94.3% to 92.5% in the last day.
Reuters contributed to this report.
