US: Despite soft PPI, fundamentals point to firm inflation ahead - Wells Fargo


According to analysts from Wells Fargo, despite the first negative reading in the monthly PPI, fundamentals point to a firming inflation environment during the second half of the year. 

Key Quotes: 

“On broad-based weakness, the PPI for final demand unexpectedly fell 0.1 percent in July—extending the recent decline in the year-over-year rate. This only heightens anticipation for tomorrow’s CPI update.”

“Marking the first monthly decline since August 2016, the PPI for final demand unexpectedly contracted in July. Price declines were broad-based with lower readings in energy and services, while wholesale food prices remained flat.”

“Our favorite measure of core producer prices, ex-energy, food and trade services, was flat on the month, taking the year-overyear rate down modestly to 1.9 percent. It is important to remember the PPI data can be volatile on a monthly basis. That said, today’s miss heightens the focus on the July CPI report. From our view, the health of economic fundamentals continues to point to a firming inflation environment in H2.”


 

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