Let me break it down: PPI is the Producer Price Index, and CPI is the Consumer Price Index. The basic transmission chain is: raw material price increases → factory production costs rise (PPI goes up) → businesses pass the costs onto retail prices → CPI goes up! This time, although the PPI year-over-year figure hit 5.4, part of it is due to a low base effect from the same period last year. That said, today’s data—whether it’s the core, year-over-year, or month-over-month—gives the same answer: inflation stickiness is on the rise. PPI is a leading indicator, and downstream there’s still PCE. So if the leading indicators don’t look good, the market will assume downstream indicators won’t look good either. Key point: just because PPI rises doesn’t mean CPI will definitely follow. But this time is different. Combined with the initial jobless claims data, employment remains resilient, so businesses have the confidence to pass on costs. That’s why the probability of PPI transmitting to CPI this time is much higher than before. So now that you know today’s PPI, you can start analyzing tomorrow’s CPI... OK, class dismissed. #PPI #CPI