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13 June 2024 | FXGT.com

Weaker PPI and Higher Jobless Claims Contradict Fed’s Steady-For-Longer Stance

  • US Producer Price Index (PPI) Rises 2.2% Annually in May: The Producer Price Index (PPI) for final demand in the US increased by 2.2% on a yearly basis in May, as reported by the US Bureau of Labor Statistics. This was below market expectations of 2.5% and a slight decline from April’s revised 2.3%.
  • Core PPI Performance The annual core PPI, which excludes food and energy prices, rose by 2.3% in May, also below the market expectation of 2.4%. On a monthly basis, the PPI declined by 0.2%, while the core PPI remained unchanged.
  • Initial Jobless Claims Increase Initial jobless claims rose to 242K for the week ending June 8, compared to the previous week’s 229K, surpassing initial estimates of 225K. This marks the highest level since August 2023.
  • Continuing Jobless Claims Rise Continuing jobless claims increased by 30K to 1.820M for the week ending June 1, the highest level since November 2021. The 4-week moving average of continuing claims rose to 1.797M, up from 1.788M last week.
  • Impact of US Data: Softer-than-expected PPI numbers and rising jobless claims are contradicting the Fed’s steady-for-longer stance. While non-farm payrolls show strength, the rise in jobless claims suggests underlying weaknesses in the labour market. The softer PPI report has increased expectations for cooling inflation, which could lead to further easing of the US Dollar Index. Fed funds futures markets are now pricing in two rate cuts by the end of the year.
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