There has been a decline in wholesale pricing, which is yet another evidence that inflation is reducing.
In terms of the DJIA and S&P 500, -0.72% (-0.18%)
During the month of May, wholesale prices in the United States saw a fall for the second time in the last three months, according to the numbers. Among the factors that contributed to this fall was the decrease in the price of gasoline, which may be another indicator that the rise in inflation that occurred earlier this year is starting to slow down.
On Thursday, the government made the announcement that the producer-price index had declined by 0.2% compared to the previous month. According to the findings of a poll that was carried out by the Wall Street Journal, economists predicted that there would be growth of 0.1%.
A alternative measure of wholesale pricing that removes unpredictable expenditures related with food and energy as well as trade margins was found to be steady for the first time in a year. This finding is more significant than usual since it indicates that wholesale pricing has not changed.
A more reliable predictor of future inflation is the core price index, which is regarded by the Federal Reserve to be the most accurate indicator.
Wholesale inflation has fallen as a result of a report on consumer prices that was published in May and indicated that there had been no increase for the first time in more than two years. This report was produced in the wake of certain recent developments.
The Federal Reserve may decide to lower interest rates as early as September in reaction to the most recent inflation forecasts. This decision might become effective as early as September.
Most of the time, wholesale prices are able to accurately forecast future inflationary trends. During the month of May, the rise in wholesale prices over the period of the preceding twelve months was 2.2%, which is a reduction from the 2.3% growth that occurred during the previous month.
In the course of the previous year, core prices increased at a pace of 3.2%. This rise happened over the course of the year
The PPI report provides information on the expenses that companies spend for a variety of products, such as fuel, packaging, and other things that are included on the list. These expenditures are often passed on to customers at the retail level, and they serve as an indicator of whether or not inflation is moving in the opposite direction, namely, growing or decreasing.
It is important to note that the fall in the cost of items was mostly caused by the decrease in the price of gasoline. Moreover, there was a decrease in the price of food.
However, the cost of services, which is the key component that drives inflation, remained stable in the month of May, despite the fact that it had seen a considerable increase in the previous month.
Over the course of the last year, there has been a 2.6% rise in the total costs of services, and these expenses have returned to levels that are close to those that existed prior to the outbreak of the epidemic.
As one moved farther down the pipeline, the rate of inflation came down to a lower level. It was found that the wholesale cost of partly produced goods decreased by 1.5%, while the price of raw materials decreased by 1.8%. Both of these decreases happened simultaneously.
In spite of the fact that the rate of inflation is still beyond the 2% yearly aim that the Federal Reserve has established, the most recent figures on the Consumer Price Index (CPI) and the Producer Price Index (PPI) suggest that the Federal Reserve is making progress.
The personal consumption expenditures index, which is the preferred inflation measure of the Federal Reserve, incorporates both of these indexes into its calculation. The PCE for the month of May will not be made accessible until two weeks from now.
The rate of inflation is estimated to be 2.7% when the PCE index is used in the calculation. However, even the Federal Reserve is dubious about the possibility that the rate would decrease far more in 2024 than it has already dropped.
In accordance with the quarterly forecast that was presented by the central bank on Wednesday, it is anticipated that the PCE will finish the year at about 2.6%.
Is it enough to drive the interest rates down to a more reasonable level? It is anticipated that the Federal Reserve would lower interest rates by at least one and maybe two percentage points throughout the course of this year.
With a focus on the years to come: Clark Bellin, president and chief investment officer of Bellwether Wealth in Lincoln, Nebraska, said that “the weaker-than-expected PPI data is another sign of continued progress on inflation, and it keeps the prospect of a rate cut alive in 2024.” Bellwether Wealth is located in Lincoln, Nebraska. The headquarters of Bellwether Wealth may be found in Lincoln, Nebraska.
When compared to the S&P 500 Stock Price Index (SPX), which had a gain of 0.18% during trading on Thursday, the Dow Jones Industrial Average (DJIA) suffered a drop of 0.72% during the trading session.
