Producer prices

The April PPI jumped .6% m/o/m, double the estimate and comes after a 1% rise in March. The core rate was higher by .7% vs the estimate of a .4% increase and matches the rise seen in March. For those that want to see the easy comp y/o/y increase, it was up 6.2% headline and 4.1% core.

Steel prices were the standout on the goods side with its 18.4% spike. Food prices also jumped, by 2.1% m/o/m led by beef/veal/pork. Goods prices ex food/energy rose 1% after a .9% rise in March. We saw yesterday a jump in consumer prices for home furnishings. In PPI, ‘furnishings wholesaling’ prices rose 3.1% in April from March. Flooring & floor coverings prices increased by 2.8% m/o/m and 7.2% y/o/y and major household appliances by .6% and 16% y/o/y. On the flip side, apparel wholesaling prices fell 11.5% but with apparel sales now picking up steam, that will change. In fact, apparel/jewelry/footwear/accessories prices rose 1.4% m/o/m and 4.6% y/o/y. If you like the outdoors, RV’s/Trailers/Campers prices jumped 4.2% m/o/m and 68% y/o/y.

The rise in markets helped to raise the service side of PPI as ‘portfolio management’ fees were up by 1.5% m/o/m and 33% y/o/y (asset price inflation showing up in PPI). Airline fares, building materials, physician care and fuels/lubricants retailing added to the upside too. Transportation costs, a key part of the current inflation story, did this: truck up .5% m/o/m and 9.2% y/o/y, air up 1.2% m/o/m and 5.3% y/o/y and rail up by .6% m/o/m and 3.1% y/o/y.

Inflation in the pipeline do not point to anything temporary. Core processed goods prices rose 2.9% in the month vs 3.2% in March, 1.8% in February and 1.4% in the two prior months. Core unprocessed goods prices rose 1.2% m/o/m after increasing by 3.2% in March.

Bottom line, inflation is here and it is no longer a speculation. The only speculation is to how long it lasts. How much inflationary pain will the economy and consumers have to deal with before it slows down and how will the Fed confront it as ‘price stability’ is still one of their mandates, even if they define it as a 2% per annum degradation of one’s standard of living and the purchasing power of the US dollar. If Jay Powell doesn’t step up soon, his fate will be that of Arthur Burns and G. William Miller.

In terms of market reaction, CPI always dominates so it is why PPI is getting a yawn. Inflation breakevens are little changed after yesterday’s increase.