January Business Inflation Higher Than Expected At 1.4%. Rates Rise. (Data downloads, charts)

The US Producer Price Index, which measures inflation at the business and manufacturing levels of the economy, was 1.4% in January and 4.6% year-over-year through January. Excluding volatile oil and food costs from the readings, “Core” PPI for January was 0.3% and 1% YOY through January. These monthly “All” and “Core” numbers were higher than expected, and the Core year-over-year number being up 1% is cause for concern. The news has pushed rates higher this morning (along with $126b in Treasury auctions announced for next week), and tomorrow’s consumer inflation number will give us another key inflation signal to follow today’s.

You can click 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, and it will display a chart where you will see the monthly see-saw as inflation rises and falls monthly, which contributes to rate volatility. 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 higher than expected reports like today’s cause markets to question that, and bonds trade wildly as inflation expectations are reconciled.