The latest Producer Price Index (PPI) data came in much higher than expected Wednesday, registering the biggest jump in more than three years and adding to the likelihood that advisors may have to contend with a Fed rate hike down the road.
The index for final demand rose 6% percent for the 12 months ended in April, according to the Bureau of Labor Statistics, registering the largest 12-month increase since moving up 6.4% percent in December 2022.
The number also marked a significant jump from March’s upwardly revised 4.3% increase.
PPI is an important indicator of inflation and the latest number comes hot on the heels of the latest Consumer Price Index data, which came in higher than expected Tuesday.
In a note released earlier this week before the PPI data came out, Chris Zaccarelli, chief investment officer at Northlight Asset Management said that inflation is moving higher amid the conflict with Iran and the related closure of the Strait of Hormuz.
“Given that inflation is heading in the wrong direction and the labor market is holding up, it’s very unlikely that the Fed will be able to lower interest rates any time soon and it’s possible that we may start pricing in rate hikes for next year,” said Zaccarelli, in the note.
The S&P 500 Index is up 0.5% in the wake of the PPI number, while the Dow Jones Industrial Average is down 0.4%.
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