Rate-Hike Odds Steady As Food & AI Lift Producer Price Inflation To 4 Year High

After the hotter-than-expected CPI earlier in the week, wholesale inflation was expected to accelerate at a slower pace in October (relative to the +1.3% MoM surge in September).

Headline Producer Prices printed just slightly cooler than expected (+0.3% MoM vs +0.4% MoM exp), lifting PPI up 6.5% YoY (from 6.3% YoY in September). That is the highest YoY print since Nov 2022

On a MoM basis Energy actually deflated (but is accelerating YoY)...

With Fuel inflation absolutely dominant...

...but arguably that is 'peaking' this month, given the rapid decline in crude prices in the last month...

Food prices are soaring though...

Core PPI (Ex-Food and Energy) rose 0.3% MoM as expected and up 5.0% YoY...

Goods prices rose at a faster pace than Services costs but both rose in October (for the 3rd straight month)...

And AI is also having a sizable effect with the recent rapid surge in memory prices has stabilized (but is not dropping)...

We warned you...

And the pipeline for further inflationary pressure remains with Intermediate Demand soaring...

As we noted here, the PPP-CPI spread continues to signal margin pressure is coming for American companies...

Finally, and most importantly, rate-hike expectations remain high with December still pricing in a 15% chance of a 50bps hike...

And stocks definitely don't feel priced for that.