Producer Prices Deflate, Retail Sales Contract: October Economic Data Paints Bleak Picture

BY Benzinga | ECONOMIC | 11/15/23 08:36 AM EST

The economic landscape is experiencing a notable shift following the summer rebound, as evidenced by the latest data released Wednesday.

The Producer Price Index (PPI), a key indicator of wholesale prices, recorded a stronger-than-predicted decline, while retail sales figures showed a contraction on a monthly pace, both painting a picture of economic slowdown.

These figures follow lower-than-expected Consumer Price Index (CPI) data released Tuesday, indicating the prolonged period of high-interest rates is starting to impact the economy.

Before the release of Wednesday’s economic data, market expectations were firmly set on interest rates holding steady in September, with a forecast of four rate reductions next year commencing in May.

Producer Prices Fall More Than Expected In October

  • The PPI fell by 0.5% month-on-month, marking the first move towards deflation since May 2023, down from a downwardly revised 0.4% surge in September and below the expected 0.1% increase.
  • Annually, the PPI is up by a modest 1.3%, a robust decrease from September’s 2.2% and well below the forecasted 1.9%. The decline in the annual rate ends a period of four consecutive monthly increases, suggesting a shift in the pricing power dynamics within the economy.
  • The core index, which excludes the volatile components of energy and food, remained unchanged on a monthly basis, declining from a downwardly revised 0.2% seen in September and falling short of the anticipated 0.3%.
  • On an annual scale, the core PPI is up 2.4%, down from both the previous and expected figures of 2.7%.

Retail Sales Reflect Waning Consumer Demand

  • Retail sales, a direct measure of consumer spending, also showed signs of strain. The data reveals a month-on-month contraction of 0.1%: a slowdown from the upwardly revised 0.9% increase in September, but slightly better than the expected 0.3% contraction. This decline is the first negative turn for monthly retail sales since March 2023, indicating a potential shift in consumer confidence and spending habits.
  • On a yearly basis, the growth in retail sales has tapered off, falling from 4.1% to 2.5%.
  • When excluding expenditures on gasoline and automobiles, there was a slight increase of 0.1% in retail sales, down from the 0.8% rise in September.

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