Firstly, in my note this morning, I meant to say “I want to push back on those that say GLOBALIZATION is over.”
PPI for April was about as forecasted when we include the revisions to March. Versus last year headline PPI has slowed to 2.3% from 2.7% and that is the slowest pace of gain since January 2021 but keep in mind here, while price gains are definitely slowing, the comparisons are VERY EASY too. In April 2022 PPI was up 11.2%. Energy prices rose .8% m/o/m but lower by 8.1% y/o/y. Food prices declined by .5% m/o/m while still up 2.5% y/o/y.
Core goods prices rose .2% m/o/m and 3.3% y/o/y. The BLS said carbon steel scrap, plastic resins and materials, aircraft and aircraft equipment, and fluid power equipment led the way up. Prices for trucks was a particular drag.
On the service side, prices rose .3% m/o/m and by 3% y/o/y. Interestingly, prices for portfolio management drove the gain as I guess fees were up on the rise in stocks and bonds this year. Transportation/warehousing prices dropped by 1.7% m/o/m and is down for a 4th straight month with shipping costs sharply off their highs.
Inflation in the pipeline ex food and energy rose m/o/m though prices are down y/o/y.
Bottom line, as stated, most goods prices continue to see slowing in the rate of increases and at least with shipping costs they’ve fallen notably as we know. Comps are really easy too on a y/o/y basis. The consumer shift away from goods spending and into services continues to be reflected here as well.
I’ll say again that the real question is where do things settle out at when the goods inflation dust settles in 2024. In the 20 yrs leading into Covid, core goods prices in CPI averaged ZERO. Are we going back to that trend line? I don’t think so because labor costs globally will be more expensive and just in time inventory management is dead. That doesn’t mean goods inflation will be high though, we always get the benefit of technology, but all it needs to do is rise 1-2% instead of zero and that is a notable change in long term trend.
As seen with CPI, PPI provided no upside surprise and continue moderation and yields are falling in response as are inflation breakvevens but that is also due to the jump in initial claims (see below). The US dollar though is up but gold is too.
PPI
Initial jobless claims jumped to 264k from 242k. That’s the biggest one week print since October 2021. The 4 week average rose to 245k from 239k. Continuing claims were up by 12k after falling in the two prior weeks. They are now above 1.8mm for the 8th straight week.
Bottom line, between this report, what I heard from ZipRecruiter Tuesday night, and the holes in the BLS report seen Friday, the labor market continues to show fraying around the edges that I expect to be more notable in the months and quarters to come as the economic recession becomes clear.
Initial Claims
Continuing Claims
END