US August PPI Rose 5.4% YoY, Gold Fell Over 1%, Brent Crude Broke Above $105 as Rate Hike Expectations Rose

TradingKey - On September 10, Eastern Time, data released by the U.S. Bureau of Labor Statistics showed that the Producer Price Index (PPI) for final demand rose 0.4% month-over-month in August, matching market expectations, and climbed 5.4% year-over-year, higher than the market expectation of 5.3%. The July PPI month-over-month gain was revised from 0.0% to 0.1%, while the year-over-year increase was revised from 4.7% to 4.8%.

Prices for final demand goods rose 1.1% month-over-month in August, with energy prices rising 4.2% and diesel fuel prices surging 24.1%. Prices for final demand services edged up 0.1% month-over-month.

The final demand price index excluding food, energy, and trade services rose 0.3% month-over-month, down from 0.4% in July, and increased 4.7% year-over-year, flat from July.

The rebound in headline PPI year-over-year was mainly driven by energy prices, while the month-over-month growth rate of core metrics slowed compared to July, though the year-over-year growth rate remained at a relatively high level of 4.7%.

[Source: U.S. Bureau of Labor Statistics]

Following the release of the PPI data, U.S. Treasury yields rose, with the 10-year Treasury yield advancing 5.63 basis points to 4.893%. The 2-year U.S. Treasury yield gained 5.96 basis points to 4.487%, while the 30-year U.S. Treasury yield climbed to 5.3381%.

In commodities, Brent crude futures broke above $105 per barrel, rising over 4% on the day; gold futures fell over 1% at one point and were trading at around $4,363 per ounce as of press time.

[Source: TradingView]

Oil prices remaining at high levels have heightened uncertainty over the inflation outlook. Following the PPI release, the market will focus on the August Consumer Price Index (CPI) to be released the following day to gauge whether rising energy prices have transmitted to prices of other goods and services.

Intraday data from the CME FedWatch Tool showed that after the PPI release, the market-implied probability of a 25-basis-point rate hike by the Federal Reserve in September rose to 74% from 62.1% the previous day, while the probability of at least one rate hike by the October policy meeting climbed to 82%. Looking ahead, the August CPI, crude oil price trends, and the Fed's September policy decision will remain the primary focus for markets.