By Sam Dustin
(eToro Blog) The Producer Price Index in the United States rose 0.8% according to latest data from the Labor Department. Analysts were forecasting a growth of 0.2%. The core PPI which excludes food and energy printed at 0.2% versus the 0.1% expected. The PPI index captures the change in the price of finished goods and services sold by producers. The rise in wholesale prices in September was attributed to higher energy costs. However economists expect inflationary pressures to come down as demand slows down in China and Europe. If inflationary pressures remain, it will make the job of the Federal Reserve difficult in providing economic stimulus to the economy. Adding stimulus contributes to inflation in the broader economy.
Economists and policy makers around the world are ignoring inflationary data and focusing on growth amid concerns of a Greek default. A default by Greece would cause slowdown in economic growth due to fears of contagion. The increase in PPI was attributed to 4.2% increase in gasoline, 10% rise in food and 0.6% rise in truck prices. The cost of finished consumer goods rose 0.6%. According to the last Federal Reserve policy meeting, policy makers expect core and headline inflation to head below the 2% target rate in the next few months. The Fed like other Central banks is more focused on growth and said, “With stable inflation expectations, significant slack in labor and product markets, slow wage growth, and little evidence of pricing power among firms, inflation was likely to decline moderately over time.”
According to the Treasury International Capital (TIC) data released today, foreign residents increased their holding of long term securities in August to a net of $66 billion. At the same time U.S. residents increased their holdings of long term foreign securities by $8.1 billion. The net foreign purchase of long term securities stands at $57.9 billion.
U.S. markets are clawing their way back into positive territory with the Dow up 0.5%, the Nasdaq up 0.6% and the S&P 500 up 0.8%. Traders on OpenBook continue to remain bearish on the U.S. markets with a ratio of 10 shorts for every long on the S&P 500 (SPX500). The shorts have their limits around 1140 and stops around 1250.
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