With all signs pointing towards economic growth, markets were not all surprised when today’s Producer Price Index registered higher than expected. Mortgage markets are flat in response to the data.
The impact of PPI is muted for three other major reasons, too:
- At 2.0%, the year-over-year increase in PPI is much lower than it has been over the past 18 months
- Energy costs continue to drop, reducing the cost of running a business
- There is no direct relationship between PPI and consumer prices, the basis of inflation.
Tomorrow morning, however, the Consumer Price Index will give insight into just how much of the cost increases have been passed to consumers. Economists are expecting a 0.2% increase, ignoring the impact of the volatile energy and food sectors.