Stock market crash concerns are flying ahead of the Producer Price Index (PPI) inflation report due this Thursday, June 13. The release of the PPI immediately follows the Consumer Price Index report, or CPI, due Wednesday. That report is due the same day as the Federal Reserve’s June interest-rate decision.
What should you expect this time around?
Well, the PPI usually takes a back seat to the CPI, but this time around, expect even the PPI to receive serious scrutiny as economists and investors alike search for any evidence of easing prices.
If you recall, wholesale prices rose 0.5% in April, the largest increase in a year and higher than projections for annual producer inflation of 2.2%. The core PPI, which excludes food and energy costs, also climbed 0.5%, more than double forecasts of a 0.2% jump.
Wholesale prices tend be viewed as a future indicator for consumer inflation. Indeed, as production costs rise, producers will frequently raise the price of goods, effectively passing over higher costs to customers to be captured in the CPI or Personal Consumption Expenditures (PCE) consumer inflation gauges.
As such, the April PPI came as something of a disappointment, especially after a fairly strong CPI reading. The CPI increased 0.3% in April, snapping a streak of 0.4% monthly inflation readings.
That said, all eyes are on Tuesday and Wednesday of this week.
What Does the PPI Mean for a Potential Stock Market Crash?
Expect inflation to take center stage entering the Federal Reserve’s policy meeting this Wednesday. Indeed, with little chance of a rate cut this time around, investors will be more eager to hear Fed Chair Jerome Powell’s attitude regarding the state of prices currently.
Many economists are holding out hopes for a rate cut come September, something Powell may either confirm or reject this week.
In that regard, the PPI will offer some much-needed insight following an expectedly mixed CPI. While the CPI is projected to increase just 0.08% in April, that’s because of a steep decline in gasoline and oil prices. Indeed, the core CPI is expected to increase at 0.3% on the month, reflecting annual inflation of 3.5%.
Overall, expect markets to respond — potentially drastically — to the results of the Fed policy meeting and the relevant inflation readings.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
