October PPI Rises 0.3%, Cooler Than Expected: What It Means for Rates and Markets

U.S. wholesale prices rose less than expected in October. The Producer Price Index climbed 0.3% for the month, the Bureau of Labor Statistics said Friday, under the 0.4% economists had forecast and well below September’s jump of more than 1%.

The numbers

• Headline PPI, month over month: +0.3% (forecast +0.4%)
• Headline PPI, year over year: 6.5%, the largest 12-month increase since November 2022
• Core PPI, month over month: +0.3%, in line with forecasts
• Core PPI, year over year: 5.0%, in line with forecasts

Cheaper energy did most of the work. The Labor Department said crude oil prices fell 10.3% and diesel fell 7.9% during the month. The annual rate still looks high partly because of how low prices were a year ago.

Why it matters

PPI tracks what producers get paid for goods and services, so it often hints at where consumer prices go next. A softer month is welcome after this week’s hotter-than-expected CPI report, where headline prices rose 0.4% for the month. New to these reports? Start with what CPI is and how it’s measured.

What it means for rates

Not much has changed for the Federal Reserve. Analysts said the softer reading takes a little pressure off, but with consumer inflation still running hot, traders are pricing in about an 89% chance of a rate increase at the December meeting, based on CME FedWatch. The debate is over the size of the move, with some economists warning that a half-point hike would be risky for a fragile economy.

Stocks, gold and bitcoin

For stocks, a cooler wholesale reading is a small relief in a week dominated by inflation worries and the leadership change at Nvidia, though one report rarely shifts the trend. Gold and bitcoin both tend to react to rate expectations: anything that lowers the odds of aggressive hikes usually helps them, and early reports showed both moving higher after the release. If you’re weighing the two, see our guide on bitcoin vs gold.

What to watch next

The Fed’s December meeting is the main event. Before that, traders will watch next week’s earnings, led by Nvidia on Tuesday, and any Fed speakers reacting to this week’s mix of hot consumer prices and cooler producer prices.

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This article is for information only and is not financial advice.