Producer Prices Jump Another 0.6 Percent in October Yet Bonds Yield Dive

Producer Prices Jump Again

The BLS Producer Price Index (PPI) shows another steep rise in October.

Month-Over- Month Details 

• The Producer Price Index for final demand increased 0.6 percent in October, seasonally adjusted.
• Final demand prices moved up 0.5 percent in September and 0.7 percent in August. 
• Over 60 percent of the October increase in the index for final demand can be traced to a 1.2-percent rise in prices for final demand goods. 
• The index for final demand services moved up 0.2 percent, and prices for final demand construction advanced 6.6 percent.
• Prices for final demand less foods, energy, and trade services moved up 0.4 percent in October after increasing 0.1 percent in September. 

Producer Prices Year-Over-Year

Year-Over- Year Details 

• Final demand rose 8.6%
• Final demand for services rose 5.9%.
• Final demand for goods rose 14.2%
• Final demand for energy rose 42.%.

PPI Intermediate Demand

At the intermediate stages prices are rising even faster.

Pundit Reaction

On the PPI news inflation screams could be heard in mainstream media and the usual places. 

Producer prices rose by .6% in Oct., bringing the YOY rise to a record 8.6%. However, prices are up 8.3% during the first ten months of the year. That annulizes to 10%. So official #inflation numbers in 2022 will be higher than in 2021 as soaring costs get passed on to consumers.

— Peter Schiff (@PeterSchiff) November 9, 2021

Bond Market Reaction

The bond market reaction was the opposite. For the third time recently, including the most recent jobs report, bond yields fell in the face of strong data. 

As I type, the 30-year yield is down another 7 basis points to a new low for the move at 1.81%. The 10-year yield is down 6 basis points to 1.44%.

I will cover more bond details shortly. 

Meanwhile today's bond market reaction highlights what I said yesterday in Inflation Fears Nowhere to be Found in Long Term Treasuries