US PPI Explodes 1.3% M/M, Core +0.7%—Largest Surge Since March 2022, Retail Sales Beat

Thursday: Headline PPI jumped 1.3% m/m (forecast 0.5%) and 6.3% y/y; Core PPI +0.7% m/m and +5.0% y/y. Retail Sales rose 0.8% m/m (consensus 0.3%), but the control group gained only 0.1%. Initial Jobless Claims came in at 199k, while continued claims fell to 1.71 million.

PPI's 1.3% monthly move marks the largest monthly increase since March 2022, reinforcing hawkish pressure on the Fed despite a brief rally in Treasuries. Retail spending remains resilient but masks energy-driven gains; core demand (control group) is softer. Labor market remains steady, supporting the case for higher-for-longer rates.

The Fed's 28 October meeting is now the pivotal test. If employment data weakens materially between now and late October, the narrative may shift to growth concerns. However, current momentum in PPI and retail suggest the inflation-first scenario still dominates. Monitor weekly jobless claims and any surprise downside revisions to prior reports as the best early warning of a Fed pivot.