Source: Zhitong Finance
Author: Wei Haoming.
In June, the PPI growth rate in the USA was slightly higher than expected, mainly driven by cost inflation in the services sector.
The PPI growth rate in the USA was slightly higher than expected in June, due to the increasing profit margins of service providers, which offset the impact of continuous decline in commodity costs for the second consecutive month. Data released on Friday by the US Bureau of Labor Statistics showed that the YoY growth rate in June's PPI was 2.6%, the highest since March 2023, with an expected value of 2.3% and a previous value of 2.2%. The MoM growth rate of PPI in June was 0.2%, with an expected value of 0.1% and a previous value of -0.2%.
The PPI report shows that service costs rose by 0.6%, almost all of which were related to the 1.9% increase in the profit margins of wholesalers and retailers. At the same time, last month's PPI data was significantly revised upward. The YoY and MoM growth rates in May were both adjusted upward by 0.2 percentage points, and the core PPI YoY and MoM were both adjusted upward by 0.3 percentage points.
However, commodity costs fell. The terminal commodity demand index fell by 0.5%. The processing product costs of intermediate demand fell by 0.2%, which was the third consecutive month of decline over the past four months.
The categories used in the PPI report to calculate the inflation measure preferred by the Fed(PCE price index) were mixed. Among them, the price of air tickets rose 1.1%, and the price of investment portfolio management services rose 1%. Price growth in healthcare-related industries was more moderate. Medical expenses rose by 0.2%, and hospital outpatient expenses rose by 0.1%. The PCE price index for June will be released later this month.
Before the release of the PPI report, the US CPI in June fell by 0.1% MoM, the first decline since the outbreak of the epidemic. Core CPI in June increased by 0.1% MoM, the smallest increase since August 2021, and market expectations were for an increase of 0.2%. After the CPI report, the market was boosted by expectations that the Fed would cut interest rates in September.
After the unexpected rise in PPI, analysts believe that the slight optimism brought about by CPI data may be affected because the overall PPI and the PPI excluding food and energy are higher than expected. In addition, significant upward revisions were made to the previous PPI data, making the discrepancies in YoY indicators even greater. Statisticians need to carefully study the details and sort out the components of PCE inflation, but at first glance, the changes in PCE as the preferred inflation measure of the Fed will not be as friendly as the CPI data indicated yesterday.
However, inflation measures that exclude food, energy, and trade and have lower volatility remain unchanged. Compared with a year ago, the indicator has slowed to 3.1%. Paul Ashworth, chief North American analyst at Capital Economics, stated in a report: " Sub-item data used to calculate PCE in June PPI is significantly lower than expected, and it seems that PCE growth in May may also be revised downward, although the magnitude is small."
After the release of the PPI data, the yield on U.S. bonds rose on Friday, but the overall expectation that the Federal Reserve may cut interest rates at the September meeting did not change. The yield on the 10-year US Treasury bond rose by 3.5 basis points to 4.227%, higher than the 4.204% before the data release. After the data was released, the yield on the 2-year US Treasury bond rose slightly to 4.510%, from 4.495% prior to the report. Spot gold fell by 7 dollars in the short term, hitting a low of 2396.09 dollars per ounce. The US dollar index DXY rose by 14 points in the short term and is now trading at 104.38.
Editor / jayden