Today's Report (10/14/2021)

The Producer Price Index for final demand increased 0.5% in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved up 0.7% in August and 1.0% in July. On an unadjusted basis, the final demand index rose 8.6% for the 12 months ended in September, the largest advance since 12-month data were first calculated in November 2010.

Nearly 80% of the September increase in the index for final demand can be traced to a 1.3% rise in prices for final demand goods. The index for final demand services moved up 0.2%.

Prices for final demand less foods, energy, and trade services moved up 0.1% in September after increasing 0.3% in August. For the 12 months ended in September, the index for final demand less foods, energy, and trade services rose 5.9%.

What is it?

It measures the change in price that manufacturers and wholesalers pay for goods during various stages of production.

What are the fundamental effects?

A jump in the PPI means higher production costs for companies. If businesses pay more for goods, it is more likely to pass on some of the higher costs to consumers. It is watched by central bankers as part of fulfilling their mandate of price stability.

How does it affect the markets?

CURRENCY - A reading that is stronger than forecast is generally supportive for the US Dollar, while a weaker than forecast reading is generally negative for the US Dollar. A fast-rising inflation report, however, can hurt the Dollar this is because the Fed can respond aggressively, as to jeopardize US economic growth altogether.

STOCKS - If the price of creating goods increases, this could erode profits and endanger dividends.

BONDS - If the PPI detects rising price pressure in the economy, it could depress bond prices and force interest rates higher. No change or a decline is viewed favourably by bondholders because it suggests the absence of any troublesome inflation.

US CORE PPI

What is it?

This excludes food & energy but is viewed as a better gauge of inflation.