US: PPI continues to rise firmly - Nomura

Analysts at Nomura note that US PPI continued to rise firmly by 0.3% m-o-m, above the consensus forecast of a 0.1% gain.

Key Quotes

“Even after stripping out of volatile components such as food, energy and trade services, "core" PPI showed another strong reading of a 0.4% m-o-m gain, exceeding market expectations (Consensus: +0.2%). The strength was broad-based, suggesting a pick-up in pipeline inflation, but note that PPI does not reflect any imported goods prices.”

“Incorporating incoming data, we now expect a 0.1% m-o-m decline (-0.066%) in headline CPI. Its 12-month change rate will likely come in at 2.3% (2.346%).”

“Incoming readings indicate that the contribution from PPI's subcomponents to m-o-m core PCE price inflation will likely be more modest in March than in February and January. This poses moderate downside risk to March core PCE price inflation forecast.”

“GDP tracking update: The impact of incoming PPI data on our GDP tracking model was slightly positive. The PPI for processed goods for intermediate demand fell 0.3% m-o-m in March, suggesting real inventory investment could be stronger in Q1. This was offset partly by downward adjustment to our tracking estimate for real equipment and residential investment as relevant PPI components came in stronger than we anticipated. In addition, February wholesale inventory report lowered the wholesale inventory buildup, but the impact on our tracking model was only minor. Altogether, we raised our Q1 GDP tracking estimate by 0.1pp to 1.8% q-o-q saar.”