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By Greg Warner, CTP
Co-Head of Investment Management
HilltopSecurities Asset Management
This morning’s release of the February producer price index (PPI) from the Bureau of Labor Statistics (BLS) came in hotter than expected and will put an end to any lingering hopes for rate cuts this summer. The 0.7% gain in the headline PPI for the month crushed the median forecast for a +0.3% increase while the year-over-year rate surged to +3.4% from January’s +2.9% and easily topped forecasts for a +3.0% increase. The core PPI, which excludes food, energy and trade, wasn’t quite as bad but still posted a +0.5% increase for February and +3.5% for the year. It’s not just that the PPI numbers were ugly, but the trend is very disconcerting as PPI has been gaining steam with larger monthly gains for four months in a row. All of this coming before the Iran war sent oil prices dramatically higher which will undoubtedly push producer prices up further in the months to come.
The biggest contributor to February’s increase was a 0.37% rise in services costs, as well as gains in food (+0.13%) and energy (+0.12%). The next couple of months will see huge contributions from energy thanks to rising gas and oil prices. Food will be impacted as well due to higher costs for transportation and fertilizer.
While PPI is not as closely followed as the CPI (consumer price index) or the PCE (personal consumption expenditures), today’s data adds to the growing mountain of evidence that inflation remains a problem that isn’t going away any time soon. That will keep the Fed firmly on hold and there is zero chance of a rate cut coming at today’s FOMC meeting. More on that later today.
About Scott McIntyre, CFA
As HilltopSecurities Asset Management’s Co-Head of Investment Management, Scott McIntyre specializes in investment management services and is responsible for the management, oversight and trade supervision of more than $30 billion in institutional fixed income assets for HilltopSecurities’ public sector municipal clients. Scott also provides investment advice and consulting, reviews local government investment policies, formulates overall investment strategies, evaluates account performance and oversees the day-to-day operations. He is a member of the Chartered Financial Analyst (CFA) Institute and a CFA Charterholder, a two-term advisor to the GFOA Treasury and Investment Management (TIM) committee, a Registered Investment Advisor, and holds FINRA Series 7, 24, 63, and 65 licenses.
About Greg Warner, CTP
As HilltopSecurities Asset Management’s Co-Head of Investment Management, Greg Warner specializes in investment management services and is responsible for the management and oversight of more than $30 billion in institutional fixed income assets for HilltopSecurities’ public sector municipal clients. Greg coordinates all client services and portfolio management duties, including security evaluation and portfolio analysis, trading, investment reporting, board presentations, and monitoring of broker-dealer relationships. He is an advisory committee member to the Texas Association of Counties, a member of the Government Treasurers’ Organization of Texas (GTOT), a Registered Investment Advisor, a Certified Treasury Professional (CTP) and holds FINRA Series 7, 63, and 65 licenses.
About Matt Harris, CFA
As HilltopSecurities Asset Management’s Senior Portfolio Advisor, Matt Harris specializes in investment management services for public sector municipal clients. He developed his experience in the banking industry, supporting balance sheet management, interest rate risk analysis, liquidity planning, and investment strategy implementation. At HilltopSecurities, he works closely with clients to develop and implement customized investment strategies, oversees account documentation and reporting, and assists clients with the public funds depository review process, including competitive RFP evaluations. Harris is a member of the CFA Institute and a CFA Charterholder, a Registered Investment Advisor, and holds FINRA Series 7, 63, and 66 licenses.
The paper/commentary was prepared by HilltopSecurities (HTS). It is intended for informational purposes only and does not constitute legal or investment advice, nor is it an offer or a solicitation of an offer to buy or sell any investment or other specific product. Information provided in this paper was obtained from sources that are believed to be reliable; however, it is not guaranteed to be correct, complete, or current, and is not intended to imply or establish standards of care applicable to any attorney or advisor in any particular circumstances. The statements within constitute the views of HTS as of the date of the document and may differ from the views of other divisions/departments of Hilltop Securities Inc. and its affiliates. In addition, the views are subject to change without notice. This paper represents historical information only and is not an indication of future performance. This material has not been prepared in accordance with the guidelines or requirements to promote investment research, it is not a research report and is not intended as such. Sources available upon request.
Hilltop Securities Inc. is a registered broker-dealer, registered investment adviser and municipal advisor firm that does not provide tax or legal advice. HTS is a wholly owned subsidiary of Hilltop Holdings, Inc. (NYSE: HTH) located at 717 N. Harwood St., Suite 3400, Dallas, Texas 75201, (214) 859-1800, 833-4HILLTOP.