Manufacturer Price Index Slides: Does soft wholesale pricing pricing confirm the weakness of demand?
The manufacturer price index (PPI) for final demand fell 0.5% in April, its biggest decline in a year. Final demand services reduced the decline down 0.7%, led by the standing margin compression in business services – especially machinery and vehicle bulking, which drowned 6.1%. Energy prices were flat, despite a significant decline in energy (-0.4%) and food (-1.0%).
The core PPI, which excludes volatile food, energy and business services, fell by 0.1%with the first decline since April 2020. Year by year, the index increased 2.4%, making the productive inflation moderate. For traders, the pricing of weak services and a combination of soft core readings raises red flags for corporate margin, especially in retail and transport areas.
Federal Reserve District Survey Paint Mixed Regional approach
Philadelphia Fed’s May Manufacturing Business Outlook Survey indicated the ongoing weakness on -4.0 with the current activity index from -26.4 in April, yet is still in contraction. The new orders were rebounded in the positive field, but the shipment declined again, and the elevated input cost is a concern. Nevertheless, expectations for future development rose rapidly, climbing with a six -month outlook index to 47.2.
In contrast, NY Fed’s Empire fell from State Index -8.1 to -8.1, with a third consecutive monthly decline. While new orders improved, hired and confident lagged behind. Complicating any dowish outlook from the Federal Reserve, the highest in two years, prices increased.
Labor market stable but not strong
Early unemployed claims were kept stable at 229,000 for the week ending May 10, while the average of four weeks increased to 230,500. Constant claims also increased marginally, which remains stable, but does not tighten further – Fed policy is an important input for expectations.
Outlook: Careful recession on consumer and retail equity
The combination of soft retail sales, a decline PPI and weak regional manufacturing data suggests headwinds for consumer demand and corporate revenue growth. Despite different signs of flexibility, such as stable employment in Philadelphia and future trade optimism, broad signal consumer discretionary and bends recession in short term for retail areas. Traders should further monitor consumer data and fed the commentary closely, especially with inflation pressure between goods and services.
