US PPI & Retail Sales / Japan Wages Blowout
Figures out yesterday showed that the US producer price index (PPI) rose in February, by the most in six months, mainly driven by increased food and fuel costs. The headline gauge jumped 0.6%, well above the 0.3% market calls, the previous reading was 0.3%. The core, so ex food, energy, and trade rose 0.4%, above the 0.3% consensus, however, below the 0.6% previous reading.
On a year-on-year basis, the headline print rose 1.6%, again well above the 1.2% estimate, and 0.9% previously, with the core coming in at 2.8%, the highest for 4 months. The monthly headline PPI can be volatile due to its exposure to food and energy prices. This seemed to be the case for February’s numbers, given that food jumped 1% and energy rose 4.4%.
However, to muddy the waters we also had US retail sales report yesterday, which were weaker than expected. The headline came in at +0.6%, 0.2% below market consensus, although well above the revised -1.1%, with ex auto at 0.3%, again 0.2% below estimates, and the previously revised to -0.8%.
The retail sales control group, which excludes sales of food services, building materials, autos and gasoline and feeds into the GDP, was also softer, coming in flat versus expectations of 0.4%, and the revised -0.3% in January.
Meanwhile, yesterday we wrote about how the Bank of Japan (BOJ) is set to discuss bringing an end to its negative interest rate policy next week, with the decision expected to hinge on the outcome of the yearly wage negotiations by Japan’s largest union, Rengo.
Earlier today it was announced that Japan’s largest companies agreed to hike wages by 5.28% for 2024, the biggest increase in 33 years, according to Rengo. Last year, wages rose by an average of 3.8%, around double the average of the preceding 20 years.
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