The Balance Today: News You Need To Know on Sept. 14, 2022

Producer Prices Cool But a Rate Hike Is Likely Unavoidable

Customers in line, talking to cashier with ipad

Tom Werner / Getty Images

The Producer Price Index (PPI), which measures wholesale inflation from the perspective of producers, decreased 0.1% in August, according to data released by the Labor Department this morning.This is encouraging after yesterday’s Consumer Price Index data(which shows how much more we will pay for goods in stores), showed that inflation is still making things like food and housing more expensive. The PPI is worth paying attention to, because when costs rise for producers, it usually means prices will change for consumers like us. 

The PPI dropped for a second month in a row, a first since the start of the pandemic, with the decline largely driven by easing energy prices. Excluding food and energy costs, prices rose 0.2%. So while today’s report offers some good news about inflation, yesterday’s consumer inflation figures show that higher prices on many essentials like groceries are still burning a hole in our wallets.

But even with higher prices, Americans seem to be feeling better about the state of their personal finances. Research company Morning Consult’s Index of Consumer Sentiment showed that U.S. consumer confidence jumped 5.5% in August—the biggest increase since March 2021. The report showed an increase in consumer confidence in 44 out of 50 states, largely driven by falling gas prices.

Meanwhile, taking out a mortgage got more expensive as the average rate on a 30-year fixed-rate loan surpassed 6% for the first time since 2008, according to the latest data from the Mortgage Bankers Association (MBA). As higher mortgage rates continue to push potential homebuyers out of the market, mortgage applications declined 1.2% in the week of Sept. 9, compared to the week prior, and mortgage refinancing activity (which is sensitive to changing rates) continued to remain more than 80% lower compared to last year.

A worse than expected retail inflation number dragged stock markets down yesterday, and also set the stage for what’s to come next. With inflation still soaring, economists are predicting the Federal Reserve will try to fight it with a super-sized rate hike next week. While it was the shock of the August inflation data that rattled markets, volatility may likely come down as the market sentiment begins to factor the Fed’s next move. 

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  1. Bureau of Labor Statistics. “Producer Price Index News Release summary.

  2. Bureau of Labor Statistics. “PPI for final demand, 1-month percent change, seasonally adjusted.”

  3. Morning Consult. “Consumer Confidence Rose 5.5% in August, Breaking Yearlong Slump

  4. Mortgage Bankers Association. “Mortgage Applications Decrease in Latest MBA Weekly Survey.

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