Market 08/13: Producer Services Inflation Drops Sharply

Key highlights:

• Producer price inflation drops sharply, services prices collapse

• FED cut 0.25% or 0.5% for September?

• Small business sentiment improves in July

• US budget deficit hits 1.5 trillion YTD (27%)

• Starbucks steals Chipotle's CEO

• Elon and Trump's conversation exceeds 1 billion views

• Market: No war, no recession, no inflation?

Producer price inflation drops sharply, services prices collapse

• PPI, producer price inflation index drops sharply YoY to just 2.2%, below 2.3% forecast and from 2.7% previous month

  • PPI ex energy and food drops sharply from 2.7% to 2.4%

• Energy prices rose in July but services prices collapsed for the first time since December last year.

• Monthly slowdown evident with PPI up only +0.1% below +0.2% forecast and +0.3% previous

  • PPI ex energy and food flat at 0% lower than +0.2% forecast

• Overall monthly, goods prices up +0.6% while services prices down -0.2%

  • Mostly from energy prices +1.9%, of which gasoline +2.8%

• Investment management costs still up +2.3%, not declining with the market

• Raw material inputs buck the price trend, up +3.2% YoY from 1.9% previous

• Finished products also up +0.8% YoY vs -0.3% previous month

→ This is not a good report for US businesses as selling prices fall but input costs continue to rise.

FED cut 0.25% or 0.5% for September?