US DATA REACT: Michael Woolfolk of Bank of New York Mellon says while
headline PPI at -0.6% m-o-m was below consensus (-0.2% MNI median), the
core (ex food and energy) was up 0.1% in line with expectations. Energy
prices (21.0% of the index) fell by 2.9% m-o-m, driven by a 7.4% decline
in gas prices and a 5.6% decline in home heating oil. The magnitude of
the decline (gas/oil) was not expected, he says. With core PPI at 1.0%
y-o-y. “there is little in the way of inflationary risks to motivate the
majority on the FOMC to raise rates at this time,” Woolfolk says. Indeed
should inflation be the “principle determination” in deciding when rate
normalization should begin. “…By relying on this measure, the Fed
could well be repeating the same mistake it made 6 years ago when rates
were cut to 46-yr lows on deflationary concerns,” Woolfolk says.