By Tom Burnett CFA
On May 12 and May 13 the Bureau of Labor Statistics reported the consumer and producer price indexes for the month of April. Both sets of price data rose sharply from previous months.
The CPI increased 0.8% in April after rising 0.6% in March. Over the past 12 months, the Index rose 4.2% which was the largest 12-month increase since September 2008. The ‘core’ rate, which excludes food and energy, rose 0.9% from the prior month, the largest monthly increase since April 1982. The ‘core’ rate has risen 3.0% over the past 12 months. That rate is the highest 12-month ‘core’ rate registered since 1995. In response to the unexpected increases, the stock markets sold off sharply on May 11 and May 12.
On May 13, the BLS announced producer price information for April. The PPI rose 0.6% in April and 6.2% since April 2020. The 6.2% year-over-year rate was the highest since November 2010. The ‘core’ PPI rate of increase was 0.7% for April, and the ‘core’ rate now stands 4.6% above the level one year ago. That rate is the highest year-over-year increase since August 2014. Investors monitor these prices carefully to gauge whether inflationary pressures could force the Federal Reserve to cut back monthly bond purchases and raise short term interest rates. In response to the inflation press releases, the bond market sold off as shown by the yield on the ten-year Treasury Index which rose from 1.57% on May 7 to 1.68% after the PPI news was announced.
The next CPI announcement will be made on June 10, 2021, and the next PPI release will be issued on June 15, 2021.
Tom Burnett CFA is Director of Research