Producers of Raw Materials Suffer as Wholesale Inflation Surges
The metal and raw material producers experienced a setback following the release of unexpectedly strong wholesale inflation data. According to the Labor Department, U.S. supplier prices jumped 0.3% in July compared to the previous month, primarily driven by higher meat prices and increased wholesale profit margins. This surge has raised concerns among some investors who fear a potential second wave of inflation, especially as oil and food prices continue to rise.
Analysts from brokerage Bank of America Global Research hailed the July CPI report as undeniably encouraging. They highlighted that the annualized rates of "core" inflation, which exclude volatile categories of goods, are now within the target range set by the Federal Reserve. Furthermore, they noted that there has been a significant turnaround in price trends for these non-volatile categories of goods.
In recent months, the breadth of disinflation has also expanded, with certain core goods categories experiencing outright deflation. This development has caught the attention of strategists who believe that the wholesale inflation data might prompt the central bank to reevaluate its rate plans. Quincy Krosby, Chief Global Strategist at brokerage LPL Financial, emphasized that the PPI report serves as a reminder that the Fed is not yet ready to declare victory over inflation.
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