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We get a good look at the state of US inflation this week with two important reports. Producer Price Index numbers for October come on Tuesday while Consumer Price Index stats follow on Thursday. Will we see a slight cooling, or will inflation continue to burn bright? 

US looks to CPI for transitionary pressures 

Let’s start with Consumer Price Index inflation. 

Last month’s report showing data for September showed a 0.4% monthly increase. According to the Bureau of Labour Statistics, the CPI rose 5.4% from a year ago that month too. 

Core CPI, which excludes food and energy prices, is up 4% on an annualised basis. 

CPI inflation essentially sits at a near 13-year high at the moment. So, is this all transitionary as the Fed says? 

There’s a real belief that inflation could top 5% in the US this year. We know the Fed is starting to scale back QE – having last week announced the tapering of monthly asset purchases – but with inflation sailing way past the 2% target, more action may be needed by the central bank. The Fed struck a cautious tone on inflation but gave a clear signal it is not in a hurry to raise rates and remains of the opinion that inflation will be transitory, albeit longer lasting than previously imagined. 

In terms of what’s driving prices high prices, across the year it has mostly been used car sales and travel costs, excluding fuel and food. For example, the price of used cars is up 24.4% across the year.  

However, used car and truck prices fell 0.7% in September after a 1.5% decline in April. Airline fees, which have been up and up and up across 2021, also fell by 9% in September’s data. Progress? In these areas certainly, but other sectors are starting to rise and continue to push CPI inflation higher. 

Furniture and appliance costs are up. Owner’s equivalent rent – how much homeowners think they could rent their properties for – is on the rise too. New vehicle prices are accelerating. 

This month’s CPI reading will be watched with a new level of scrutiny, but it is not the only inflation-measuring metric released this week. 

US PPI also in focus this week

Producer Price Index numbers for October come on Tuesday in a week where inflation is the main focus. 

Much like CPI data, PPI stats show wild year-on-year increases. In terms of Producer Price Index inflation, it was up 8.6% on an annualised basis last month, against September 2020’s levels. 

Essentially, global supply chain issues means producers and manufacturers are paying higher input costs, which are then passed onto consumers. 

However, PPI did show a little month-by-month cooling in September. Between then and August, it rose 0.5% – much lower than markets were anticipating. In fact, this was the lowest monthly PPI increase in 2021 to date. 

But soaring energy costs are still pushing up producer spending. The Bureau of Labour Statistics says final demand for energy rose 2.8% in September, account for a massive 40% chunk of the broad-based advance in producer spending. 

Rising energy prices and supply chain bottlenecks are essentially a recipe for major PPI inflation. Fed Chair Powell has warned these supply chain issues will last at least well into the next year. 

“The combination of strong demand for goods and the bottlenecks has meant that inflation is running well above target,” Powell said in mid-September. “We expect that it will continue to do so in the coming months before moderating as bottlenecks ease.” 

President Biden now has the Port of Los Angeles, the largest port in the US, running 24/7 to help keep consumer goods moving, but if energy costs remain high, it’s unlikely simply getting more trucks, trains and ships on the move will be able to drop PPI and CPI prices alone.  

The situation is still delicate, but inflation has been the name of the game for the US’ economic recovery thus far. Expect more of the same, with maybe a slight cooling, with this week’s CPI and PPI releases. 

Earnings season begins to wind down 

There are just two more weeks to go of this quarter’s earnings season – but there are still plenty of large caps ready to report in. 

Watch out for quarterly financial reports from a mix of big tech and media giants this week. Disney is the headliner, but also be sure to keep an eye on crypto exchange Coinbase as well as Virgin Galactic and PayPal. 

Use our US earnings season calendar to see who is reporting and when on Wall Street this week. 

Major economic data 

Date  Time (GMT)  Asset  Event 
Tue 09-Nov  10:00am  EUR  ZEW Economic Sentiment 
  10:00am  EUR  German ZEW Economic Sentiment 
  1:30pm  USD  PPI m/m 
  1:30pm  USD  Core PPI m/m 
  6:01pm  USD  10-y Bond Auction 
Wed 10-Nov  1:30pm  USD  CPI m/m 
  1:30pm  USD  Core CPI m/m 
  1:30pm  USD  Unemployment Claims 
  3:30pm  USD  Crude Oil Inventories 
  6:01pm  USD  30-y Bond Auction 
  9:45pm  NZD  FPI m/m 
Thu Nov-11  12:30am  AUD  Employment Change 
  12:30am  AUD  Unemployment Rate 
  7:00am  GBP  Prelim GDP q/q 
  10:00am  EUR  EU Economic Forecasts 
Fri Nov-12  2:00am  CNY  Retail Sales y/y 
  3:00pm  USD  JOLTS Job Openings 
  3:00pm  USD  Prelim UoM Consumer Sentiment 


Key earnings data 

Mon 8 Nov  Tue 9 Nov  Wed 10 Nov 
The Trade Desk (TTD)  Palantir Technologies (PLTR)  Fiverr International (FVRR)  
Viatris (VTRS)  Coinbase Global (COIN)   Beyond Meat (BYND)  
Lemonade (LMND)  Upstart Holdings (UPST)   Walt Disney (DIS)  
PayPal Holdings (PYPL)     
Plug Power (PLUG)     
Roblox Corporation (RBLX)     
Virgin Galactic Holdings (SPCE)      

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