PPI Numbers Miss Drastically and What This Means for the U.S.

Alan Penny

12 December 2019

3 min read

dollar bills and American flag

  • Core PPI misses drastically
  • PPI month over month misses as well
  • Unemployment Claims higher than anticipated

Early on Thursday, the United States released its PPI numbers suggesting that the economy is still uneven and rocky to say the least, as three numbers missed in a row. This is becoming quite a theme from the United States, and it’s likely that the Federal Reserve will be paying attention to this situation. Ultimately, this could be a bad sign for the economy going forward.

The PPI numbers announcements

Early indications as far as a reaction is concerned are that the market is reacting to it somewhat. The first announcement, the Core PPI month over month figures came in at -0.2%, as opposed to the anticipated positive 0.2% by the market. PPI month over month came in flat, while it was believed to be 0.2% for the announcement. Furthermore, Unemployment Claims came out at 252,000, anticipated to be only 213,004, showing some concern for employment figures as well.

There is nothing good in this announcement for the United States, and it’s very likely that the rest of the world still has a lot of catching up to do.

There is nothing good in this announcement for the United States, and it’s very likely that the rest of the world still has a lot of catching up to do. It seems that the US will still outperform, but this may cast a shadow.

Going forward

The US economy is starting to slow down a bit. That in itself isn’t a huge surprise, but it is likely that the market will continue to see money flow into the United States. If nothing else they will be buying treasury bonds. It could work against the value of the US dollar a little bit, but the biggest problem that the greenback has is that the European Central Bank is already involved in quantitative easing and it’s very likely they will be for the foreseeable future. With that in mind, it will naturally put a little bit of upward pressure on the US dollar, exacerbating a lot of trouble around the world.

Ultimately though, stock market participants will eventually start to take a bit of comfort in the idea of the Federal Reserve bailing them out with loose monetary policy if the numbers get worse. The Federal Reserve has shown itself to have the back of traders on Wall Street, but there is a somewhat high bar to cross before we get there.

This is yet another disappointment when it comes to economic figures, but not necessarily enough to get people thinking about the Federal Reserve in the short term. All things being equal, the market is probably going to continue the way it has, but this could kick off a pullback that stock traders will be taking advantage of. Ultimately, the United States still is the “strongest” economy that traders have the opportunity to bet on. In this environment, it’s more or less an idea of there’s nowhere else to go.

Written By
Alan Penny

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