Don’t Panic Just Yet

U.S. PPI rose 5.4% year-on-year in August, marking a clear acceleration and exceeding expectations of 5.3%. The market’s first reaction was naturally: Inflation is picking up again—will the Federal Reserve continue to turn more “hawkish”?
But a calm breakdown of the data shows that the story is not so simple. Prices of final-demand goods rose 1.1% in August, with energy prices a major contributor, including a 24.1% surge in diesel prices; service prices rose just 0.1%.
In other words, a considerable portion of this PPI acceleration came from an energy shock, rather than an across-the-board loss of price control. Core PPI rose 4.6% year-on-year, higher than the previous reading, but core prices increased just 0.2% month-on-month, actually below expectations.
So the last thing to do now is to see 5.4% and immediately go all-in on a bearish outlook. What the market is really waiting for is CPI. If the consumer side does not continue to deteriorate, this PPI reading looks more like an “inflation warning”; but if CPI also exceeds expectations, that is when vigilance truly needs to be raised.#美国8月PPI录得5.4%高于预期