The market today will focus mostly on the US PPI figures even though we will also get the latest US NFIB report and hear from Fed Chair Powell. The US Core PPI Y/Y is expected at 2.4% vs. 2.4% prior, while the Core M/M measure is seen at 0.2% vs. 0.2% prior.
US PPI 12:30 GMT (08:30 ET)
The PPI measures changes in prices that manufacturers pay for goods during various stages of production. Higher prices might eventually be passed on to consumers. The producer price index has three different indexes for each stage of production: crude goods (crude oil, wheat, timber and so on), intermediate goods (auto parts, leather, flour and so on) and finished goods (gasoline, automobiles, apparel and so on). The Core PPI excludes the volatile food and energy prices which make up 40% of the PPI for finished goods.
The markets focus on the finished goods because these are the products retailers pay for and might influence the prices consumers will see. Although there isn’t a perfect correlation between PPI and CPI, they tend to move in tandem over the long term. There are some key differences though. The most important one is that PPI does not take into account the price of most services. In the CPI, services like housing make up for a large part of the index.
US NFIB 10:00 GMT (06:00 ET)
Before the PPI report, we get the US NFIB Small Business Optimism Index which is expected to tick lower to 88.1 vs. 88.5 prior. This is a leading indicator as small businesses generate roughly 45% of US economic activity. The index though, has been hovering around recessionary levels for quite some time while the economy remained resilient. This is probably due to the difference in businesses concerns with high inflation remaining the main one.
In fact, just 8% of small business owners said that “poor sales” were their number-one concern, compared to the all-time survey high of 34%, and just 4% of small businesses marked interest rates as their top concern, compared to a survey high of 37%. Nonetheless, it's worth to keep an eye on this report even if it's not market moving.
FED CHAIR POWELL 14:00 GMT (10:00 ET)
Finally, we will hear from Fed Chair Powell but it's unlikely that he will deviate from his recent comments before the US CPI report due tomorrow.
