The SPY Takes A Bath On PPI Print, What's Wall Street Saying?

The broad market SPDR S&P 500 ETF Trust SPY pushed lower on Friday following the Bureau of Labor Statistics release of the latest Producer Price Index data.

Here’s what you need to know about the numbers and what leading economists are saying about the market-moving data.

PPI, By The Numbers: The index recorded a 0.8% annualized increase, representing a bounce back from its revised 0.2% in June and ahead of the expected 0.7% hike.

The surge interrupted a consistent annual decline in the PPI that lasted 12 months. Core PPI, which excludes food and energy, upheld a year-over-year growth of 2.4% for July. Read more on the PPI print here.

Quincy Krosby, chief global strategist for LPL Financial, said the PPI report underscored the Federal Reserve’s hesitance in claiming success in its inflation containment strategies.

Krosby said while portfolio management service fees have risen significantly, its reflective of other service fees, especially insurance. She noted that the broader PPI demonstrates an unsettling shift in prices, hinting at broader economic implications.

Julia Pollak, chief economist at ZipRecruiter, highlighted that despite July’s acceleration, the PPI grew just 0.85% over the year. Since the COVID-19 pandemic onset, the cost of business inputs surged 18.84%.

Bill Adams, chief economist for Comerica Bank, highlighted business input costs cooled off notably in July. “Producer prices rose slightly more than expected in July but there was an offsetting downward revision to June.”

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With the PPI’s year-over-year rise under 1% for two consecutive months — not seen since 2020 — and core PPI inflation less than 3% for the third month in a row, the situation seemed reminiscent of early 2021, Adams said.

“Inflationary pressures on business inputs have dramatically subsided as prices of energy goods and shipping services plummeted,” the chief economist said, highlighting cyclical sectors sensitive to interest rate changes, including housing and manufacturing, which are facing challenges this year.

While the U.S. economy still wrestles with inflation due to soaring wages, subsiding business input costs should steer consumer prices on a downward trajectory in the coming fall, Adams said.

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