The Bureau of Labor Statistics reported that US producer prices in February remained flat, missing forecasts and signaling potential cooling in inflation.
Market Reaction to PPI Data
Stock market futures responded immediately. S&P 500 futures trimmed losses after the report, while Dow Jones Industrial Average futures showed a 71-point drop (0.2%). Nasdaq 100 futures declined 0.4%, reversing some of the previous day’s gains as investors assess how the latest inflation data will influence Federal Reserve policy.
Fed Rate Expectations
Despite signs of cooling inflation, markets still expect the Fed to begin cutting rates as early as June. Barclays expects at least two more quarter-point reductions before the year’s end. Some policymakers express concerns about how Trump’s fiscal and trade policies will affect economic growth and inflation.
PPI Report Details
The PPI report noted a 0.2% drop in services prices offset a 0.3% rise in goods prices. A significant portion of the goods increase came from a 53.6% surge in chicken egg prices due to avian flu. In services, 40% of the decline was due to a 1.4% drop in machinery and vehicle wholesaling margins.
The PPI data suggests a slowdown in inflation, but market reactions are mixed due to uncertainty regarding future Fed policy.
