Today the market will mostly focus on the US PPI numbers although we will also get the latest report from the US NFIB and hear from Fed Chairman Powell. YoY core US PPI is expected at 2.4% vs. 2.4% previously, while core PPI is expected at 0.2% vs. 0.2% previously.
US Producer Price Index 12:30 GMT (08:30 ET)
The Producer Price Index measures changes in the prices manufacturers pay for goods during different stages of production. Higher prices may eventually be passed on to consumers. The PPI contains three different indicators for each stage of production: raw goods (crude oil, wheat, timber, etc.), intermediate goods (auto parts, leather, flour, etc.) and finished goods (gasoline, cars, clothing). etc. and so on). The core PPI excludes volatile food and energy prices, which make up 40% of the PPI for finished goods.
Markets focus on finished goods because these are the products that retailers pay for and may influence the prices that consumers will see. Although there is no perfect relationship between the PPI and the CPI, they tend to move in tandem in the long run. There are some key differences though. Most importantly, the PPI does not take into account the prices of most services. In the CPI, services such as housing make up a large portion of the index.
US Producer Price Index (blue) versus US CPI (orange)
NFIB in the US 10:00 GMT (06:00 ET)
Ahead of the PPI report, we receive the US NFIB Small Business Optimism Index which is expected to decline to 88.1 from 88.5 previously. This is a leading indicator as small businesses generate nearly 45% of US economic activity. However, the index has been hovering around recession levels for some time while the economy has remained resilient. This is probably due to a difference in corporate concerns with high inflation remaining the main factor.
In fact, just 8% of small business owners said “poor sales” was their top concern, compared to an all-time high of 34%, and only 4% of small businesses cited interest rates as their top concern. Compared to the survey results of 37%. However, it is worth monitoring this report even if it is not market impactful.
US NFIB Small Business Optimism Index
Fed Chair Powell at 14:00 GMT (10:00 ET)
Finally, we will hear from Fed Chairman Powell but he is unlikely to deviate from his recent comments ahead of the US CPI report tomorrow.
Federal Reserve Chairman Powell
