Muted PPI Offsets Hotter-than-Expected CPI Concerns, Reinforcing 25 bps Cut in November

The latest Producer Price Index (PPI) data showed no change in September, falling short of the anticipated 0.1% increase. On a year-over-year basis, the PPI rose by 1.8%, helping to alleviate some concerns raised by the hotter-than-expected Consumer Price Index (CPI) data released yesterday.

The index for Final Demand Less Foods, Energy, and Trade Services inched up by 0.1% in September, following a 0.2% rise in August. For the 12 months ending in September, this index increased by 3.2%.

In the services sector, a 3.0% increase in the index for deposit services was a major factor in the September advance in prices for final demand services. And 0.7% drop in prices for final demand energy contributed to the overall muted performance of the PPI.

This PPI data comes on the heels of a hotter-than-expected CPI report, which showed a year-over-year increase of 2.4%, above the 2.3% forecast. The Core CPI rose by 3.3% year-over-year, exceeding the expected 3.2%, and increased by 0.3% month-over-month.

Despite the mixed inflation signals from the CPI and PPI reports, traders remain confident in a 25 bps cut at the Federal Reserve's November meeting, with an overwhelming 84% probability of a cut and only a 16% chance of no change.

Stock futures showed little movement following the PPI release, with S&P 500 Futures approximately flat and Nasdaq 100 Futures down 0.2%.