Good for stocks: Strongest price decline since April 2020

Last Updated: 23. November 2023By

The good news from the inflation front does not stop. Just as the US inflation data from October delighted investors, the next surprise came in the form of US producer prices.

These too have developed significantly weaker than expected in October. Compared to the previous month, September, they even fell by 0.5%, while economists at the banks had expected an increase of 0.1%. And after an increase of 0.4% was reported in the previous month, September.

Good for stocks: strongest price drop since April 2020 By the way, that was the strongest drop in US producer prices since April 2020 – that is, in three and a half years!

Compared to the previous month, October, producer prices were only 1.3% higher. An annual change rate of 1.9% was expected, after an increase of 2.2% in September.

Why are the data actually so important for the stock exchange?

Leading indicator for inflation and interest rate development Quite simply: producer prices are considered to be a precursor to „real“ inflation, i.e. consumer price inflation. Producer prices usually run about three months ahead of consumer prices in normal times. So you can assume that consumer prices will also tend to decline further in the coming months.

In turn, this makes further interest rate increases by the US Federal Reserve unnecessary and causes interest rates on the bond and credit markets to drop again, which in turn improves financing conditions for companies and households in the USA.

Why you need stocks now! And that leads to rising stock prices. That’s why the stock exchanges reacted so happily to the data last Wednesday. After all, interest rate and inflation worries had weighed on the prices since the end of July. These days seem to be over now. The prices are rising again. And you should be part of it! With US individual stocks that can bring you significantly higher profits than the mundane index.