US PPI jumps 6% in April

The U.S. Bureau of Labor Statistics reported on May 13 that producer prices rose 1.4% in April from the prior month and 6.0% from a year earlier, the strongest 12-month increase since December 2022. The report landed a day after the Senate confirmed Kevin Warsh to the Federal Reserve Board in a 51-45 vote, a nomination Republicans described as making him the next Fed chair. (bls.gov) The April jump added to a run of firmer inflation readings after consumer prices rose 0.6% in April and 3.8% from a year earlier, according to BLS. CME FedWatch says futures prices reflect market expectations for the path of the federal funds rate, and traders have been using that tool to gauge whether rate cuts this year are becoming less likely. (bls.gov) ### Which parts of the April report drove the jump? BLS said nearly 60% of April’s increase in final demand prices came from a 1.2% rise in services, while prices for final demand goods climbed 2.0%. The agency said the monthly increase was the largest since March 2022. A 2.7% jump in margins for final demand trade services accounted for about two-thirds of the services increase, BLS said. Transportation and warehousing services rose 5.0%, and machinery and equipment wholesaling margins increased 3.5%. (bls.gov) Energy was the largest goods driver. BLS said more than three-quarters of the goods increase came from a 7.8% jump in final demand energy prices. ### Did the report show pressure beyond food and energy? (bls.gov) The index for final demand less foods, energy and trade services rose 0.6% in April and 4.4% from a year earlier, BLS said. That measure was the largest 12-month increase since February 2023. The user’s supplied context referred to “core producer inflation” at 2.8%, but the BLS release does not use that figure for its broad underlying final-demand measure. (bls.gov) BLS’s published underlying gauge for April was 4.4% year over year for final demand less foods, energy and trade services. ### What does this have to do with the Fed right now? CME FedWatch says its probabilities are derived from 30-day fed funds futures and are used to track what traders expect the Federal Reserve to do at upcoming meetings. (bls.gov) The tool page does not itself state a narrative conclusion, but it is the market reference for whether expectations for cuts are rising or falling. The Federal Reserve’s next scheduled policy meeting is June 16-17, according to the central bank’s calendar. Minutes from the April 28-29 meeting are due on May 20. (bls.gov) ### What exactly did the Senate confirm about Kevin Warsh? The U.S. Senate confirmed Kevin Warsh on May 12 to be a member of the Board of Governors of the Federal Reserve System for a term running from February 1, 2026, according to the official roll-call record. The vote was 51 yeas to 45 nays, with four senators not voting. (cmegroup.com) Senator Tim Scott, the Republican chairman of the Senate Banking Committee, said after the vote that Warsh had been confirmed “to serve as Chair of the Federal Reserve Board of Governors.” That characterization appeared in Scott’s official statement after the Senate vote. (federalreserve.gov) ### What are investors watching next? June 11 is the next scheduled release date for the Producer Price Index, according to the BLS calendar. June 16-17 is the next scheduled Federal Open Market Committee meeting, with a press conference set for June 17, according to the Fed’s June calendar. (senate.gov) May 13 market moves showed that hotter inflation did not produce a uniform reaction across asset classes. CNBC reported that the S&P 500 rose 0.58% to 7,444.25 and the Nasdaq gained 1.2% to 26,402.34 even as Treasury yields climbed and rate-sensitive sectors such as utilities came under pressure. (banking.senate.gov) (cnbc.com) (bls.gov)