Inflation Measures Dropping Significantly

(KNSI) – The distressing headlines in the financial sector have pulled down the stock market in the past week, but there is a silver lining.

The Federal Reserve’s fight against inflation is starting to show substantial progress. The Producer Price Index, which measures inflation in wholesale goods and services, unexpectedly fell 0.1% in February. The figure looks at the cost pressures facing businesses. When the PPI drops, it leads to follow through in the Consumer Price Index, which tracks prices paid by customers. The PPI rose by only 4.6% compared to a year ago.

Real-time data is coming in even better. The price of oil is below $68 a barrel for the first time since December 2021. Only about nine months ago sticker shock at the pump led to cratering consumer confidence. The cost to transport food and other necessities soared, which is still being felt at restaurants and grocery stores today.

The opposite effect could be on the way. Even more promising is that the fall is occurring counter to normal cyclical trends. Oil and gas prices tend to see strength in the springtime as markets anticipate the high demand that comes along with the summer driving season.

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