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U.S. Producer Prices Post First Drop in One-and-a-half Years

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  • U.S. Producer Prices Post First Drop in One-and-a-half Years

U.S. producer prices unexpectedly fell in August, recording their first drop in 1-1/2 years, as declines in the prices of food and a range of trade services offset an increase in the cost of energy products.

Despite the surprise weakness in producer prices reported by the Labor Department on Wednesday, overall inflation is steadily rising, driven by a tightening labor market and robust economy. The Federal Reserve is expected to raise interest rates later this month for the third time this year.

The producer price index for final demand slipped 0.1 percent last month after being unchanged in July. August’s fall in the PPI was the first since February 2017. In the 12 months through August, the PPI rose 2.8 percent, slowing further after July’s 3.3 percent increase.

Economists polled by Reuters had forecast the PPI increasing 0.2 percent in August and advancing 3.2 percent year-on-year.

A key gauge of underlying producer price pressures that excludes food, energy and trade services edged up 0.1 percent last month. The so-called core PPI gained 0.3 percent in July.

In the 12 months through August, the core PPI increased 2.9 percent after rising 2.8 percent in July.

U.S. financial markets were little moved by the data. The link between producer and consumer prices has weakened after the government revamped the PPI basket and changed methodology several years ago.

The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, increased 2.0 percent in July, hitting the U.S. central bank’s 2 percent target for the third time this year.

Economist expect the Trump administration’s import tariffs on lumber, washing machines, solar panels, steel and aluminum, as well as a range of Chinese goods, to put upward pressure on inflation in the coming months.

Wholesale food prices fell 0.6 percent last month, pulled down by sharp declines in the costs of eggs and fresh fruits and melons. Food prices, which dipped 0.1 percent in July, have now decreased for three straight months.

Wholesale energy prices rose 0.4 percent, with gasoline prices increasing 0.6 percent after slipping 0.1 percent in the prior month. Energy prices fell 0.5 percent in July.

Overall, the cost of wholesale goods was unchanged in August after edging up 0.1 percent in July. Prices for iron and steel scrap fell 5.6 percent in August, the biggest drop since October 2017. Nonferrous scrap prices decreased 8.7 percent, the largest decline since January 2009.

The cost of services slipped 0.1 percent last month, led by a 0.9 percent decline in the index for trade services, which measures changes in margins received by wholesalers and retailers. Services dipped 0.1 percent in July.

Over 80 percent of the drop in the cost of services last month was attributed to margins for machines and equipment wholesaling, which fell 1.7 percent

The cost of healthcare services rose 0.3 percent as a 0.5 percent drop in prices for hospital outpatient care was offset by a 0.6 percent jump in the cost of doctor visits, which was the largest gain since June 2010. There were also increases in prices of hospital inpatient and dental care.

Healthcare prices ticked up 0.1 percent in July.

Those healthcare costs feed into the core PCE price index.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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