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Highlights
- The PPI index, which gauges the price at which raw materials are sold on the open market, came in at 0.6% in February.
- Analysts on average had expected the U.S. PPI for February to be up 0.3% m/m, Retail sales to rise 0.8% m/m.
- The PPI inflation data holds extreme importance given the Fed's next March meeting is scheduled for next week.
- In the aftermath of the disappointing PPI data, Bitcoin prices took a fall.
The US PPI inflation data released by the Bureau of Labor Statistics on Friday showed that wholesale inflation experienced a surge in February. The PPI index, which gauges the price at which raw materials are sold on the open market, came in at 0.6% in February, higher than analyst forecast of 0.3%. That also compares to a 0.3% increase in January.
US February PPI Inflation Rises
The Producer Price Index for final demand rose 0.6 percent in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices increased 0.3 percent in January and edged down 0.1 percent in December 2023. On an unadjusted basis, the final demand index advanced 1.6 percent for the 12 months ended in February, the largest rise since moving up 1.8 percent for the 12 months ended September 2023.
Analysts on average had expected the U.S. PPI for February to be up 0.3% m/m and up 1.1% y/y. The number stands up/down from the prior readings of a rise of 0.3% m/m and 0.9% y/y.
The PPI inflation data holds extreme importance given the Fed’s next March meeting is scheduled for next week. Being an important measure to understand purchasing power and inflation, today’s PPI report will be viewed as a crucial sign for the upcoming Fed decision. According to the CME FedWatch Tool, investors have placed 99% bets that the Fed will keep interest rates unchanged at its next meeting. Market participants had previously expected the Fed to lower its key interest rates as early as March. However, with inflation proving to stay sticky, the idea that the Fed may keep interest rates higher for longer has cemented further.
Retail Sales Rise in The US
CNBC also showed that Retail sales recovered on a busy morning for economic statistics, up 0.6% month over month according to Commerce Department data that is seasonally adjusted but not inflation adjusted. Previously the U.S. Retail Sales data showed a fall of 0.8% m/m in January. The number for February was predicted by economists to be up 0.8% m/m.
Crypto Market Reaction
In the aftermath of the disappointing PPI data, Bitcoin prices took a fall. At the time of writing, the OG-crypto currency was down 0.5% at $72,702.40. As compared to the same time yesterday, the trading volume of Bitcoin also fell 0.3% and stood at $43.9 billion. Usually, lower interest rates take away the shine of government financial assets as the return of interest on them stands lower. This increases the risk appetite among investors, thereby benefiting the crypto markets.
The move in the Bitcoin prices was in tandem with other financial sectors as well. According to Reuters, the expectation that the Federal Reserve will lower interest rates in the upcoming months was dampened by hotter-than-expected producer prices reading on Thursday, which caused U.S. stock index futures to halve their gains.
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