The Bureau of Labor Statistics released the April 2024 U.S. PPI figures. The headline figure came in hot for the month, but downward revisions were the main focus of the day.
Producer Price Index (PPI) data released by the U.S. Bureau of Labor Statistics on Tuesday came with some surprises. The headline figure came in hot for April, but downward adjustments to prior figures brought some relief. Health care costs, a significant contributor to the Federal Reserve’s principal core inflation metric, decelerated slightly, and air travel fares declined. After the PPI figures were released, the S&P 500 index rallied during the morning trading session in anticipation of Wednesday’s pivotal Consumer Price Index and retail sales data releases.
PPI for final demand rose 0.5% on a monthly basis and a 2.2% on an annual basis. The consensus was a 0.2% monthly but still a 2.2% annual rise. The annual rate coming in on target, despite the monthly figure being off, points to downward adjustments to figures from previous months, thus indicating a cooler economy than originally calculated.
Examples of the adjustments leap off the page. The headline PPI for March was revised downward from an initial estimate of 0.2% to a revised figure of -0.1%. When isolating the effects of food and energy, PPI rose 0.3% for the month, as opposed to an anticipated 0.2%. At the same time, the March figure also received a downward revision, from 0.2% to -0.1%.
The recalibration of PPI components that contribute to the core Personal Consumption Expenditures (PCE) price index indicates that economy may not have been as heated in Q1 as previously surmised. The PPI’s comprehensive index of health care services prices witnessed a 0.266% increment for the month, without seasonal adjustments. Partially attributable to prior revisions, the annualized metric for health care services inflation receded to 2.9%, a reduction from the initially reported 3.1% in March.
Prices for airline passenger services, which similarly influence the PCE price index, dropped 3.8% in April, adding some optimistic news for the Federal Reserve’s primary inflation measure. However, portfolio management fees, which typically oscillate in tandem with the stock market albeit with a minor delay, jumped 3.9% unexpectedly in April.
Looking toward CPI
The markets focused on the adjustments, and rose slightly. All eyes are now on the upcoming CPI figures, which should drop the yearly inflation figure slightly.
