Producer Price Index jumps above market expectation and could signal higher Consumer Price Index

The latest inflation reading was released today and it is much worse than the markets were expecting.

The Producer Price Index for June jumped 1.1 percent. That is far higher than the expected 0.8 percent. On the year, wholesale prices are 11.3 percent higher, just shy of the record set in March. The PPI is a leading, not lagging, indicator of inflation, meaning it measures before they are passed onto the consumer.

The reading signals next month’s Consumer Price Index will climb even higher. Yesterday’s CPI was North of 9 percent, a fresh 41-year high. Kenny Polcari, Managing Partner with Kace Capital Advisors joined Scott Shellady on Cow Guy Close. He told us the numbers were almost guaranteed the Fed will raise interest rates by a full point later this month amid the dreaded “R” word.

“Now the question is, how deep is that recession going to be and how long is it going to be? Is it going to be the short, kind of shallow one that they’re trying to tell us, or is it going to be a longer one, like we experienced back in ’79, ’80, ’81?” said Polcari.

Polcari also told us hiring will likely start to slow, signaling stagflation. As for housing, he does not expect a collapse as we saw in 2008, but prices are already coming down, and buyers will likely pull back if the standard 30-year mortgage jumps to 6.5 percent.


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