Daily Newsletter 6/12/25
PPI and Jobless Claims
Producer Price Index (PPI):
The U.S. Producer Price Index (PPI) for May rose by 0.1% from the previous month.
Core PPI, which excludes food and energy, also increased by 0.1% for the month.
On a year-over-year basis, the PPI was up 2.6%, while core PPI rose 2.7% over the past 12 months.
The data indicates that producer price inflation remains muted, with tame goods and services costs helping to keep overall price pressures in check.
Why Are Producer Prices Rising While Consumer Prices Fall?
Understanding the Divergence Between PPI and CPI
Producer prices (PPI) often lead consumer prices (CPI), but the pass-through from producers to consumers is not always immediate or complete. If producers face higher input costs but are unable or unwilling to pass those costs onto consumers—perhaps due to weak demand or competitive pressures—PPI may rise while CPI remains subdued or even declines. Recent data and analysis indicate that the Trump administration's 2025 tariffs have begun to raise costs for U.S. producers, especially in industries that rely on imported inputs. This effect is more immediately visible in the PPI, as tariffs directly increase input costs for domestic manufacturers and suppliers.
Jobless Claims:
Initial unemployment claims for the week ending June 7 were 248,000, unchanged from the previous week’s revised figure.
The four-week moving average rose to 240,250, the highest level since August 2023.
The steady level of jobless claims at elevated levels suggests a gradual softening in the labor market, with more Americans filing for unemployment benefits than in previous months.
This trend reflects growing economic headwinds and uncertainty, with some businesses reducing staff amid persistent challenges.
Big Picture: Although certain segments of the U.S. economy continue to demonstrate resilience, the broader trajectory is increasingly characterized by a moderation in growth and a gradual deterioration in labor market conditions. Recent data releases point to a deceleration in economic expansion, with GDP growth slowing and early signs of rising unemployment.
At the same time, the persistence of trade policy uncertainty—particularly related to tariffs—and ongoing inflationary pressures are amplifying downside risks. These factors are weighing on business investment, dampening consumer and business sentiment, and contributing to a more cautious outlook for the remainder of the year. As a result, while pockets of strength remain, the prevailing trend suggests that the U.S. economy is entering a period of heightened vulnerability, with slower growth, a weakening labor market, and increased exposure to external shocks stemming from policy and price instability.
Given the recent period of persistently weak consumer sentiment and ongoing economic uncertainty, tomorrow’s release of the University of Michigan Consumer Sentiment Index takes on added significance.
The trend in the University of Michigan Consumer Sentiment Index so far in 2025 has been notably weak and volatile. After four consecutive months of declines, sentiment stabilized in May at 52.2, unchanged from April and still close to record lows seen in 2022. This level is more than 24% lower than a year ago, reflecting persistent consumer concerns about the economy, personal finances, and future prospects.
The next FOMC (Federal Open Market Committee) meeting is scheduled for Tuesday, June 17, and Wednesday, June 18, 2025. The policy statement and any rate decisions will be announced at 2:00 p.m. EST on June 18, followed by a press conference with the Federal Reserve Chair. Given the Federal Reserve’s commitment to a data-driven approach in setting monetary policy, the divergence between soft data (such as consumer sentiment and business surveys) and hard data (like employment figures and inflation statistics) will undoubtedly be an integral part of their decision-making process.