Still Not Out Of The Woods

Why the tension between a relatively softer CPI print and a hotter PPI report should not be ignored.

This morning’s producer price index should make anyone declaring victory over inflation at least a little uncomfortable. I wanted to write a small note talking about why this morning’s otherwise trivial looking data points shouldn’t be overlooked and why the tension between the latest relatively softer CPI print and a hotter PPI report should not be ignored.

Wholesale prices rose faster than expected in January, with core PPI jumping 0.8% for the month, well above consensus and hotter than December. Headline PPI rose 0.5%. On a year-over-year basis, core wholesale inflation is running at 3.6% and headline at 2.9%. That’s not exactly “mission accomplished” when the Federal Reserve is supposedly aiming for 2%.

PPI tends to get less attention than CPI. But that could wind up being a big mistake.