US Producers Showing Signs of Slowing Down

Alan Penny

15 January 2020

3 min read

  • PPI and Core PPI released
  • A survey of producers prices for goods and services
  • Empire State Manufacturing released

Early on Wednesday, the United States released PPI figures, which is the Producers Price Index. These figures survey producers in order to identify changing prices in finished goods and services. There are two versions that are released, the month over month PPI figure, and the Core month over month PPI figure which excludes food and energy items.

The announcements both come out soft

The announcements came out at 8:30 in the morning New York time, and both were a bit softer than anticipated. The PPI month over month number was 0.1%, less than the anticipated 0.2% by the market. The Core PPI month over month figure came out at 0.1% as well, also expected to be a reading of 0.2% by the market.

this will certainly have an influence on inflationary figures for the end consumer in the United States

This shows that the cost of goods are starting to slip a little bit lower, and this will certainly have an influence on inflationary figures for the end consumer in the United States. Inflationary figures have been on the sidelines recently.

Going forward

The situation going forward in the United States looks to be very much like the rest of the world, a bit sluggish. However, the United States still continues to put out positive numbers, which is more than you can say about several other major economies. At this point, the question then will be what happens next now that the United States and China are signing a trade deal? That will be the next focus for markets over the next several months, when it comes to measuring inflation.

With that in mind, it should be thought of as a market that continues to see a lot of back-and-forth with regards to expectations, but the United States continues to be a winner by default. It looks very much like we are going to continue to see a lot of skittish behavior by traders, but the only thing that seems to be certain is the fact that the Federal Reserve will have to stay somewhat active or at least diligent to keep the markets afloat.

As a side note, the Empire State Manufacturing Index came out at 4.8, much better than the anticipated 3.7 reading. This shows that manufacturing is picking up in the northeastern part of the United States, and therefore shows signs of more consumption, so this could “even out” the negativity of the other announcements.

Traders will probably continue to bet on the central bank protecting them, so even though the economic situation is slowing down a bit, it’s very likely that the equity markets will continue to rise as a result. Beyond that, other markets continue to suffer and right now although we are still getting negative signs, the situation itself won’t change much. Markets will continue to favor the United States, at least from an equity side. In the currency markets though, things could be shifting a bit as we have been seen a little bit of greenback weakness recently.

Written By
Alan Penny

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