December PPI Rises 0.2% from Previous Month
Lower than November's 0.4% and Below Market Expectations
Eased Inflation Pressure Brings Relief to Markets
New York Stock Index Futures Rise, Treasury Yields Fall
Last month, the Producer Price Index (PPI), a wholesale price indicator in the United States, showed a slower increase than market expectations. As inflation concerns eased somewhat, futures for major stock indices on the New York Stock Exchange rose across the board.
According to the U.S. Department of Labor on the 14th (local time), the PPI for December last year rose 0.2% compared to the previous month, falling short of both the previous month and expert forecasts (both 0.4%).
The PPI rose at an annual rate of 3.3% over the past 12 months, up from 3% the previous month. However, it was below the market forecast of 3.5%.
The core PPI, which excludes the volatile food and energy prices to show the underlying inflation trend, recorded a 0% increase compared to the previous month. This was lower than the market expectation (0.3%) and also below November last year’s figure (0.2%). The year-over-year increase in core PPI remained at 3.5%, below the expert forecast of 3.8%.
In detail, commodity prices pushed inflation up by rising 0.6% compared to the previous month. Gasoline prices surged 9.7%, significantly impacting the 3.5% increase in energy prices. Prices of food and energy-related products also rose broadly. However, the 14.7% drop in fresh and dried vegetable prices offset the rise in commodity prices. Service prices remained unchanged compared to the previous month. Although travel transportation prices rose 7.2%, lodging costs declined.
With inflationary pressures reigniting recently, the decline in last month’s PPI somewhat eased concerns about rising prices. The wholesale price index, PPI, affects the Consumer Price Index (CPI), a retail price indicator, with a time lag. Until now, the market had significant concerns that the tariff hikes and immigration restrictions policies of President-elect Donald Trump, who will take office on the 20th, would push prices higher.
The day after, on the 15th, the Fed will release the CPI, a key inflation indicator closely watched alongside the Personal Consumption Expenditures (PCE) price index. The December CPI is expected to have risen 2.9% year-over-year, exceeding the previous month’s figure of 2.7%.
The market is almost certain that the benchmark interest rate will remain unchanged this month. The federal funds futures market reflects a 97.3% probability that the Federal Reserve (Fed) will keep the benchmark interest rate steady at the Federal Open Market Committee (FOMC) regular meeting scheduled for the 28th-29th.
With last month’s PPI increase falling short of expectations, futures for major stock indices on the New York Stock Exchange are rising across the board today. As of 9:02 a.m., Dow Jones Industrial Average (Dow) futures were up 0.22% from the previous day. S&P 500 futures and Nasdaq futures were rising by 0.29% and 0.39%, respectively. Treasury yields are also falling. The U.S. 10-year Treasury yield, a global bond yield benchmark, dropped 2 basis points (1bp = 0.01 percentage points) from the previous day to 4.78%. The yield on the U.S. 2-year Treasury, sensitive to monetary policy, moved down 2 basis points to 4.38%.
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