
You know Your Survival Guy is not in the prediction business. I don’t attempt to know the future but instead to prepare for it. But the market has no such limitations. Every month, new economic data are released, and the market reacts with glee or terror if the data are better or worse than expectations. Lately, the market has been regularly predicting lower inflation than the reported reality, and once again today, it has been surprised by inflation data. This time it was wholesale prices that were higher than expected. Jeff Cox reports at CNBC:
Wholesale prices accelerated at a faster than expected pace in February, another reminder that inflation remains a troublesome issue for the U.S. economy.
The producer price index, which measures pipeline costs for raw, intermediate and finished goods, jumped 0.6% on the month, the Labor Department’s Bureau of Labor Statistics reported Thursday. That was higher than the 0.3% forecast from Dow Jones and comes after a 0.3% increase in January.
Excluding food and energy, core PPI accelerated by 0.3%, compared to the estimate for a 0.2% increase. Another measure that also excludes trade services increased 0.4%, compared to the 0.6% gain in January.
On a year-over-year basis, the headline index increased 1.6%, the biggest move since September 2023.
A busy morning for economic data also showed that retail sales rebounded, up 0.6% on the month according to Commerce Department data that is adjusted seasonally but not for inflation. The increase helped reverse a downwardly revised 1.1% slump in January but was still below the estimate for a 0.8% increase.
Also, initial filings for unemployment insurance nudged lower to 209,000 last week, a decrease of 1,000 and below the estimate for 218,000, the Labor Department reported.
The market focused on the PPI release, which comes two days after the consumer price index, which measures what consumers pay in the marketplace, showed that inflation was slightly higher than anticipated on a year-over-year basis.
PPI is considered a leading indicator for inflation as it indicates costs early in the supply chain.
The BLS reported that about two-thirds of the rise in headline PPI came from a 1.2% surge in goods prices, the biggest increase since August 2023. As with CPI, the acceleration was traced to energy prices, with saw a 4.4% increase in the final demand measure. Gasoline prices jumped 6.8% at the wholesale level.
Action Line: Inflation is caused by too much money chasing too few goods. Until more of the massive fiscal and monetary stimulus injected by the Biden administration into the economy is removed, it will be difficult to bring inflation down. When you want to talk about preparing your portfolio for inflation, I’m here. Click here to subscribe to my free monthly Survive & Thrive letter.