June PPI Drops Unexpectedly

A new Producer Price Index (PPI) report has come out ahead of the opening bell this Friday, with results much lower than we had expected: -0.2% was a big miss from the +0.4% consensus and the +0.4% headline for May PPI. This puts a whiff of deflation in the air of the U.S. economy, many of which have outperformed expectations over the past couple months.

Subtracting potentially volatile near-term food and energy prices, the figure also disappoints: -0.3%, well off the +0.1% pace expected. This also nudges PPI ex-food & energy year over year into negative territory, -0.1%. Final demand, which was expected to fall into negative territory in June, tumbled all the way to -0.8% for the month.

While we are still far from the all-time headline low of -0.4% posted in February 2015, clearly the bounce-back we’d seen in employment and market indexes of late are showing a lack of traction in product and service pricing. Then again, we don’t re-set the table based on one data point, but this morning’s read has put us on alert for other deflationary evidence in the economy. The Consumer Price Index (CPI) for June will come out next week.

Pre-market indexes were down again following a Thursday for the Dow and S&P 500 in the red, but a turnaround looks to be underway in real time. For instance, the Dow looked to open down another 150 points just a short time ago, it’s now down 50 points with a trajectory which may push the Dow’s open into the green by the opening bell.

The good news we’ve seen just come out is concerning Gilead’s GILD remdesivir — a treatment drug candidate to remedy the effects of COVID-19. Additional data on drug testing continues to report improved recovery in COVID patients, with a reported 62% reduction in mortality risk. The drug’s positive efficacy is also reported across all racial and ethnic groups tested, with no new red flags regarding safety and tolerability.

Remdesivir currently looks to be leading the charge toward treatment of the coronavirus. While not a vaccine to immunize people from the disease, it looks to alleviate symptoms and risk of death from contracting it. Worldwide, COVID has claimed more than half a million lives — 135K in just the U.S. alone. The U.S. continues to add a record number of new cases each day, particularly in South and Western hot spots like Florida, Texas and California.

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