Down Across The Board
Following the release of October’s consumer-side inflation report, economists were just as pleased with the cooling seen through the producer price index. Released Wednesday morning, October’s PPI report, which tracks changes in final costs for businesses, posted its biggest decline in over three and a half years. Month-over-month, wholesale prices for producers declined 0.5%, far cooler than the expected Dow Jones forecast of a 0.1% increase. On an annual basis, PPI increased 1.3%, nearly one percentage point lower than September’s 2.2% yearly increase. Core PPI, which excludes volatile food and energy prices, also beat forecasts of a 0.3% increase by remaining unchanged by the end of the month.
When analyzed further, most of the price declines for October came from the goods side, because service prices didn’t move. For overall PPI, 80% of the fall in goods prices was contributed by a 15.3% decrease in gasoline prices, a similar reading that was felt on the consumer side. In response to the overwhelming positive news, stock markets stayed positive and Treasury yields continued to moderate from their previous high of 5%, with lower mortgage rates in turn creating the highest weekly mortgage demand in five weeks. More importantly, the growing sentiment and corroboration of economic data has investors to believe the Federal Reserve may be done raising interest rates. After previous estimates of rate cuts beginning late next year, several investors now hope the first of these cuts could happen in the first half of 2024.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.