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By Scott McIntyre, CFA
Co-Head of Investment Management
HilltopSecurities Asset Management
The April Producer Price Index (PPI) was much hotter than expected as the sustained increase in energy prices bleeds through to shipping and transportation costs. Final demand PPI climbed +1.4% last month, nearly tripling the median forecast and double the previous month gain with the sharpest single month advance in more than four years. The year-over-year headline was even more dramatic, rising from a revised +4.3% to +6.0%, twice the annual pace from just three months ago and the hottest reading since December 2022.
Final demand services rose +1.2%, the largest increase since March 2022, while final demand goods climbed +2.0% with over 40% due to a +15.6% rise in gasoline prices. PPI ex. food and energy jumped +1.0% in April, more than three times the median forecast and +5.2% year-over-year.
This is an unexpectedly ugly report. The rise in energy costs isn’t a surprise, but the quicker than anticipated passthrough of shipping and related costs was. On a somewhat ironic note, wholesale egg prices were down nearly 50% for the month. Mostly everything else was higher.
Energy prices are obviously driving the inflation narrative, keeping the conflict in the Strait on center stage. Over the past seven days, just 11 vessels have passed and WTI crude futures continue to trade above $100 per barrel. Despite this morning’s hot wholesale price data, the financial markets appear cautiously optimistic as President Trump and Chinese President Xi are set to meet in Beijing later today.
Fed officials are now likely to hold the overnight rate target steady at least through the end of the year. The futures market is actually indicating the next move will be an increase, although tightening monetary policy under the current administration would not be well received.
April retail sales are scheduled for release tomorrow morning. This consumer report card will provide an early look at Q2 consumption, and by extension the economic impact of higher prices on demand.
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.