Core Business Inflation Low At 0.9% YOY Through December. Rates Benefit. (Data downloads, charts)

The US Producer Price Index, which measures inflation at the business and manufacturing levels of the economy, was 0.2% in December and 4.4% year-over-year through December. Excluding volatile oil and food costs from the readings, “Core” PPI for December was 0% and 0.9% YOY through December. These monthly “All” and “Core” numbers were lower than last month’s data and at the low end of the Fed’s 1-2% comfort zone for inflation, so bonds are trading more favorably on this news plus stock losses today, which helps drive rates down.

Inflation keeps changing monthly so market trading is volatile as a result. By clicking on the Monthly ‘All’ and ‘Core’ PPI reports in our Data section (on the lower right side of the site) or going to our full data page, it will display a chart where you will see this see-saw very evident. A lot of this has to do with oil price volatility, which you can also see by scrolling to the Data section. On surface level, market sentiment seems to be that inflation shouldn’t be an issue for some time because aggregate demand is compromised by weakened consumers and businesses, but some reports (like November’s PPI) cause markets to question that, and bonds trade wildly as inflation expectations are reconciled.