This week’s economic calendar offered plenty of potential for market volatility, however, market yields remained fairly stable with headline numbers staying in-line with analyst expectations. The main outlier of the week came on Tuesday, when the Bureau of Labor Statistics released its Producer Price Index (PPI) report which came in higher than expected, and the highest level since April 2023, at 0.5% vs 0.3%. Markets were initially spooked as several of the categories that are used in the PPI are also used to calculate PCE, which is the Fed’s preferred measure of inflation. Upon further review of the data, markets eased noticing that many of the underlying components that feed into PCE actually declined. PCE will come out later this month, but this report was viewed as somewhat encouraging by market participants.
Continuing on the topic of inflation, the BLS also released April’s CPI report which marked the lowest monthly gain in Core CPI for the year. Additionally, the Core CPI number at 3.6% YoY was the lowest number in 3 years. Shelter costs continue to be the largest contributor to inflation accounting for roughly. Motor Vehicle Insurance was also a big contributor as the cost of insurance has accelerated significantly this year. Big ticket items including new and used vehicles, and household furnishings continued to cool for the year suggesting that consumers are feeling the impact of higher interest rates. Furthermore, the retail sales number came in unexpectedly flat at 0.0% vs 0.4% expected. Retail Sales are not adjusted for inflation so this report suggests real consumer spending may have actually fallen in April and could point to another weak quarter for GDP growth.
Rounding out the week, Initial Jobless Claims and Continuing Claims stayed largely in-line with expectations. Earlier this morning, the Conference Board released its Leading Economic Indicators Index which came in negative for the 26th time in the last 28 months.
Next week we’ll get a look at New and Existing Home Sales and May’s finalized report of the University of Michigan Consumer Sentiment Index. Have a great weekend!
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Author
Dillon Wiedemann
Financial Analyst
The Baker Group LP
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