CPI and PPI Data Is Due This Week — Here’s the Inflation Data Preview
Key takeaways
- CPI and PPI data are due out this week, which are two crucial indicators of how the battle against inflation is faring
- CPI measures the prices of consumer goods while PPI measures business prices
- High inflation has been a sticking factor in the U.S. economy recovery and talks of a recession have persisted
The U.S. economy has been on shaky ground since last year when the Fed took extraordinary interest rate measures to try and tame inflation. Since then, the Fed and investors have been watching the datasets (such as the consumer and producer prices) like hawks.
These two economic indicators have the potential to either set Wall Street aflame or have traders rejoicing. So what exactly are these two metrics, why are they so important and what does the preview look like ahead of the release? Let’s get into the details.
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What is CPI and PPI?
The consumer price index (CPI) tracks the average price change of a fixed basket of goods and services. The basket includes things like food, housing, healthcare and more. It’s a good indicator of how the cost of living is faring, but it can be volatile thanks to the food and energy sectors, so Core CPI strips those two out.
The producer price index (PPI) looks at the prices of things like raw materials that producers are paying and keeps track of changes in the market of sale prices for raw goods and services. It’s a potential indicator of how businesses might pass increased or decreased costs onto consumers.
They’re two important pieces of the economic data puzzle, especially when figuring out if a recession could happen, but they must be complemented with other data sets like the jobs market and unemployment to get the full picture.
What could CPI and PPI look like this week?
Predictions for April’s Core CPI figure is for a 0.3% increase, meaning it’s eased slightly from 5.6% in March to 5.5%. As for headline inflation, we’re looking at an anticipated 0.4% monthly increase and for the 5% March inflation figure to be the same in April. Anything below that would be a big win for the Fed.
There aren’t generally any consensus estimates for PPI, but the March data showed an unexpected price fall to hit 2.7% annually. Of course, predictions are just educated guesses and the economic data has repeatedly surprised us over the past 12 months, so what the figures actually hold is anyone’s guess.
The bottom line
The CPI and PPI data aren’t the be-all and end-all for the economy, but they’re helpful for investors to see where the direction of travel could be heading. Everyone is hoping for good news, but bracing for the worst after multiple bank failures and a U.S. debt-ceiling crisis in government. Stay tuned for what happens next.
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