Source: Department of Labor Frequency: Monthly Availability: Two to three weeks following the reported month Possible Impact on Interest Rates: Larger-than-expected monthly increase or increasing trend is considered inflationary, causing bond prices to drop and yields and interest rates to rise.
Current Data Reported May 5, 2000: This morning's employment report offered a few surprises with the unemployment rate falling to a 30-year low of 3.9%. Analysts expected the umployment rate to tick lower from March's 4.1% reading, but did not expected a figure this low. Payrolls increased by 340,000 jobs last month, following an upward revision to March from 416,000 to 458,000--also subtantially stronger than expected. The hourly earnings rate rose 0.4%, bringing the annualized rate to 3.8%, and the workweek increased to 34.6 hours. See "Overview" below for more information. Overview: The producer price index (PPI) is the first indicator of inflation each month. It is a measure of wholesale prices at the producer level for consumer goods and capital equipment. Unlike the CPI, it does not include services. It compares prices for approximately 3,450 commodities to a base period. Currently, the base period, which equals 100, is the average prices that existed in 1982. The PPI categories and respective weightings are:
The data covers three stages of production: finished goods, intermediate goods (those that are paritially processed), and crude materials. The latter two stages are important because they provide an early indication of price changes in the pipeline and forewarn of rising prices. The PPI can be volatile. It is best to use the six-month to one-year moving average. The bond market reacts negatively to larger-than-expected increases in the PPI. Conversely, drops in the index are viewed favorably by investors, pushing bond prices up and yields down.
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