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-Moomoo News team
U.S. producer prices increased by the most in more than 1-1/2 years in July, but the overall trend in producer inflation remained subdued amid signs the economy's recovery from the pandemic recession was faltering.
The jump in producer prices reported by the Labor Department on Tuesday, however, further diminished the risk of deflation, a decline in the general price level. Deflation is harmful during a recession as consumers and businesses may delay purchases in anticipation of lower prices.
Fed officials will see no reason to be on high alert for inflation pressures after today's modest rebound in producer prices and there is little reason for them to temper their highly stimulative monetary policy.
-Chris Rupkey, chief economist at MUFG in New York
What is Producer Price Index (PPI)?
The producer price index (PPI), published by the Bureau of Labor Statistics(BLS), is a group of indices that calculates and represents the average movement in selling prices from domestic production over time, according to the investopedia.
The PPI is different from the CPI in that it measures costs from the viewpoint of industries that make the products whereas the CPI measures prices from the perspective of consumers.
In other words, PPI tracks change to the cost of production, so we can treat PPI as a leading indicator for CPI.
What does Producer Price Index (PPI) mean?
The producer price index can be treated as a leading indicator sometimes, which shows the same trend with S&P 500.
source by Reuters, Tradingeconomics and Investopedia
editor: Eric