Good Evening,
Tomorrow should be a very interesting day due to the Producer Price Index (PPI) being released in the morning. It is another indicator for the level of inflation that our economy is experiencing. As I have mentioned, high levels of inflation usually erodes the bond market, which hurts interest rates. Last week the Consumer Price Index showed a real threat of higher prices that consumer’s are experiencing. Tomorrow, we see the Producer’s side. If prices have increased dramatically for producers it is expected that those prices will be passed on to the consumers. Do not forget, consumer spending makes up over 66% of our economy. Here is a great article entitled, “Bracing for Inflation” stating that in 2009 we should be expecting double-digit inflation.
So what will happen tomorrow?
We can only suspect that the PPI will show that prices have increased for producers. There were hints of this throughout the news today, but we will not know until tomorrow morning. It can definitely go the other way if analysts over-estimated their forecasts. See the previous post to see what analysts expect and how the PPI affects mortgage rates.
Leave a Reply