PPI Confirms Slowdown

Ordinarily, investors might prefer lower CPI and PPI. But, so far, the market hasn’t reacted well. Why not?

Sure, lower prices might give the Fed room to reduce interest rates and thereby goose the stock market. But, you have to ask “why” prices aren’t going up as quickly as before.

Is it because corporations don’t have pricing power? Is it because consumers aren’t liquid enough to shop with abandon? Or, maybe the lower data aren’t really indicative of what consumers are seeing in the supermarket?

In any case, futures got a very small bump after Feb PPI data were released this morning. This follows a nice bump from yesterday’s CPI that was immediately faded as investors still realize that Trump’s tariff policies are, as CNBC economics reporter Steve Liesman labeled them, insane.

The decline in inflation is exactly what our gas model suggested would happen. If gas prices were to remain level, we would expect CPI to continue falling.