Similar to last week’s CPI inflation data, this morning’s PPI inflation (producer price index) data noted similar softness. Markets like softness. Bad now equals good.
PPI estimates for October were +.4% and the actual data came in at +.2%. Doesn’t seem like a big difference but it is, and the direction and pace of change matters. Weaker consumer and producer/wholesale prices equating to a declining pace of inflation – we are seeing it across the board. The market also sees this and likes it because inflation, while still elevated, is cooling and lower inflation is consistent with a less aggressive Fed.
The final leg of this saga will be noted weakness in the labor market. It’s coming and coming soon because layoff announcements are up A LOT. A big negative payroll/labor report will be the switch that triggers a Fed pivot on policy.
Chief Investment Officer
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