The US released the September Producer Price Inflation (PPI) and retail sales report today. The US government shutdown last month has caused a delay in the release of some economic data, including the PPI report and retail sales reports. Ordinarily, the September data for PPI and retail sales reports would have been released in mid-October, if not for the government shutdown. We can expect the November data to be released next month.
US PPI Recovers with 0.3% Increase
Producer Price inflation month-to month rose 0.3% in September, up sharply from -0.1% in August. This matched the market consensus. On a yearly basis, PPI rose 2.7%, unchanged from a revised 2.7% in August and matching the market consensus. PPI reflects the change in prices from the point of view of producers and manufacturers, unlike the Consumer Price Index (CPI), which measures inflation from the consumer’s perspective. Today’s 0.3% reading was the second strongest gain over the past eight months, and could signal a rise in consumer inflation.
US Retail Sales Slow to 0.2%
US retail sales rose 0.2% month-to-month in September, the smallest increase in four months. This follows a strong 0.6% increase in August and missed the market consensus of 0.4%. On an annualized basis, retail sales dropped to 4.3%, compared to 5.0% in August. This was higher than the market consensus of 3.9%.
Despite the slowdown in retail sales, consumer spending likely picked up in the third quarter, despite a weakening labor market which has seen unemployment rise to a four-year high of 4.4%.
The Federal Reserve will meet on December 10, after lowering rates by a quarter-point on Oct. 29. The increase in PPI and the slowdown in retail sales support the Fed maintaining interest rates at the December meeting.
US Dollar Dips, US Stock Markets Lower after Inflation Report
The US dollar is lower after today’s soft PPI and retail sales report. The EUR/USD currency pair is up 0.3% since the releases and the US Dollar is also down against the Japanese Yen and the British Pound.
US stock markets are in positive territory today in the aftermath of the PPI and retail sale data, shrugging off the initial negative reaction to the deceleration in retail sales.
The S&P 500 Index quickly recovered and ended the day 0.91% higher at 6,765.88.
The US Dollar Index reacted more directly, with the greenback selling off firmly against all major currencies and continuing to look bearish despite its long-term bullish trend.
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