US Producer Inflation Cooler In August; Hints At Softening Demand

Economic

Summary:

U.S. producer prices unexpectedly fell in August amid a compression in trade services margins and mild increase in the cost of goods, suggesting that domestic businesses were probably absorbing some of the tariffs on imports.

The lack of strong producer price pressures, despite import duties, could also be signaling softening domestic demand against the backdrop of a struggling labor market. The Federal Reserve is expected to cut interest rates next Wednesday, with a quarter-percentage-point reduction fully priced in, after pausing its easing cycle in January because of uncertainty over the impact of President Donald Trump's sweeping tariffs."Inflation barely has a heartbeat at the producer level which shows the tariff effect is not boosting across-the-board price pressures yet," said Christopher Rupkey, chief economist at FWDBONDS. "As time goes on one has to wonder if there are slow-growth reasons and weak economic demand that is keeping inflation in check. There is almost nothing to stop an interest rate cut from coming now."

The Producer Price Index for final demand dipped 0.1% last month after a downwardly revised 0.7% jump in July, the Labor Department's Bureau of Labor Statistics said on Wednesday. Economists polled by Reuters had forecast the PPI would advance 0.3% after a previously reported 0.9% surge in July.A 0.2% drop in the prices of services accounted for the fall in the PPI. That followed a 0.7% rebound in July. Services were last month held down by a 1.7% decline in margins for trade services, reflecting a 3.9% decrease in margins for machinery and vehicle wholesaling.

But the cost of services less trade, transportation and warehousing increased 0.3% while prices for transportation and warehousing services shot up 0.9%.

Portfolio management fees increased 2.0%. Airline fares rose 1.0% while the cost of hotel and motel rooms increased 0.9%. Prices for dental services accelerated 0.6%.

Goods prices edged up 0.1% after increasing 0.6% in the prior month. Food prices gained 0.1%, with declines in the costs of eggs and fresh fruits partially offsetting more expensive beef and coffee because of tariffs. Wholesale beef prices surged 6.0% while those for coffee vaulted 6.9%.

Energy prices fell 0.4%. Excluding the volatile food and energy components, producer goods prices rose 0.3% after climbing 0.4% in July, indicating some pass through from tariffs. In the 12 months through August, the PPI increased 2.6% after climbing 3.1% in July.

Economists are expecting price pressures from tariffs to lift consumer inflation in August.

U.S. stocks opened higher. The dollar eased against a basket of currencies. U.S. Treasury yields fell.

Labor market weakness has raised concerns that the economy was stagnating. The government estimated on Tuesday that the economy likely created 911,000 fewer jobs in the 12 months through March than previously estimated.

That data followed the release last Friday of the monthly employment report, which showed job growth almost stalled in August and the economy shed jobs in June for the first time in four and a half years.

Source: Kitco

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Adam

Economic

President Donald Trump and Indian Prime Minister Narendra Modi pledged to talk and resume trade negotiations, signaling a possible thaw after weeks of a blistering fight over tariffs and Russian oil purchases.

“I am pleased to announce that India, and the United States of America, are continuing negotiations to address the Trade Barriers between our two Nations,” Trump wrote on social media Tuesday. “I look forward to speaking with my very good friend, Prime Minister Modi, in the upcoming weeks. I feel certain that there will be no difficulty in coming to a successful conclusion for both of our Great Countries!,” he added.

Modi responded shortly after with a post on X, saying that he was looking forward to speaking with Trump and that the US and India are “close friends and natural partners.”

“I am confident that our trade negotiations will pave the way for unlocking the limitless potential of the India-US partnership,” Modi said. “Our teams are working to conclude these discussions at the earliest.”

As tensions ratchet down, a team of Indian trade negotiators is discussing plans to travel to Washington in coming days, perhaps as early as next week to resume trade talks, a person familiar with the matter said, asking not to be identified as the details aren’t public.

In order to agree a trade deal, New Delhi wants the US to address the 25% reciprocal tariff on Indian exports to America and the 25% additional levy imposed as a penalty for buying Russian oil, the person said.

A spokesperson for the Ministry of Commerce and Industry didn’t immediately respond to an email seeking further information.

Trump’s comments offering a positive appraisal of relations between Washington and New Delhi come even as the US president is pressuring European Union leaders to join him in ratcheting up tariffs on India and China to punish the countries for Russian energy buys.

Trump told EU officials during a meeting earlier Tuesday that he’s prepared to join them if they impose sweeping new tariffs on India and China in a bid to raise pressure on Russian President Vladimir Putin to join ceasefire talks with Ukraine, according to people familiar with the discussions. The US is willing to mirror tariffs imposed by Europe on either country, one of the people said.

That move threatens to further complicate efforts to resolve Trump’s trade dispute with India, exacerbated last month by the US doubling the tariff rate on many goods from the country to 50% over India’s purchases of Russian oil.

Trump appeared to soften his rhetoric on India last week, saying there was “nothing to worry about” in ties between the two countries. Officials in New Delhi said at the time they viewed the comments with caution, and would wait for more signals from the White House.

Sonal Varma, an economist at Nomura Holdings Inc., said comments from both the leaders represent positive signals and increases the chances of India’s 50% tariff rate being lowered in coming months.

However, Trump’s willingness to impose sweeping new tariffs on India and China for buying Russian oil “suggests that the US wants the EU to initiate the next step on Russia-related pressures.” The EU and India are currently negotiating a free trade agreement, which would need to be considered in any decision around additional tariffs, she said.

China, Russia Ties

While India was one of the first countries to open talks with Trump on trade, the imposition of high levies on their exports shocked officials in New Delhi. US officials have expressed frustration with India’s high levies on imports and other non-tariff barriers.

Trump hit India with a 25% rate before doubling that to address New Delhi’s continued Russian energy buys. India has assailed the tariff hikes and insisted that it will continue to buy Russian oil as long as it is financially viable. India has been the largest buyer of Russian seaborne crude as the discounted barrels have helped the world’s third largest oil consumer keep its import bill in check.

The positive signals from Trump and Modi come a week after the Indian leader’s trip to China, where he held talks with Putin and Chinese President Xi Jinping. The US president had criticized the meeting at the time and said India had been “lost” to China.

“The US is India’s largest export market by a wide margin — the value of it is higher than all of the shipment to BRICS’ countries combined,” said Trinh Nguyen, senior economist at Natixis. “As such, the US and India are natural trade partners given complimentary comparative advantages. Both Modi and Trump have strong reasons to mend ties.”

Source: Bloomberg

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Thomas

Economic

The Labor Department's Office of Inspector General said Wednesday it is reviewing the "challenges" that the Bureau of Labor Statistics is facing in its data-collection efforts.

The internal watchdog, in a letter, said it was initiating that probe in light of BLS announcing a reduction in its data collection for two key inflation metrics.

The probe also comes in light of BLS recently issuing a "large downward revision of its estimate of new jobs in the monthly Employment Situation Report," assistant inspector general for audit Laura Nicolosi wrote.

The letter was addressed to William Wiatrowski, who has served as BLS' acting commissioner since President Donald Trump fired the agency's former head in early August in response to a weak monthly jobs report.

Source: CNBC

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Winkelmann

Economic

Forex

Political

BEIJING — Nearly half of U.S. businesses have redirected planned China investments to other regions over the past year — the highest on record — the American Chamber of Commerce in Shanghai said Wednesday.The business chamber's survey of members from May 19 to June 20 came shortly after an escalation in U.S.-China trade tensions and a temporary rollback of some tariffs from mid-May. The two countries last month agreed to extend the trade truce by another 90 days, to mid-November.

"For a company, 90 days, that's just way too short," Eric Zheng, President of AmCham Shanghai, told reporters, pointing out that the supply chain planning is far longer term."At least we don't need to deal with even higher tariffs [for now], but the issue is not going away, it's still here," Zheng said.As many as 47% of the survey respondents said that they had diverted investments planned for China, primarily to Southeast Asia. That's the highest share since the survey first asked the question about plans to shift investments away from China in 2017.

The Indian subcontinent, which includes Bangladesh, was the second-most popular destination for redirected investments, while the U.S. and Mexico ranked far lower.U.S. President Donald Trump has sought to encourage businesses to bring manufacturing back to America, with Trump criticizing Apple's plans to expand production in India. A few companies, especially in advanced technology, have made high-profile announcements to invest in the U.S.AmCham Shanghai's members include Apple, Ford, Honeywell, Meta and Tesla. Jeffrey Lehman, the business group's chair, pointed out that members are affected not just by U.S. tariffs on China, but Beijing's retaliatory duties, since materials needed to build the product often come from the U.S.

U.S. tariffs on Chinese goods stand at nearly 58%, while China's are around 33%, according to the U.S.-based Peterson Institute for International Economics. Tariff rates can vary by product.Competition in China's domestic market is also increasing, while confidence about the five-year local business outlook hit a record low for a fourth-straight year, the AmCham Shanghai study found.

Only 28% of respondents said that their China operating margins in 2024 were higher than that of their global business, while 33% said their China performance was actually worse.U.S. companies also said their Chinese competitors were more advanced in six out of eight categories, especially speed to market and adoption of artificial intelligence. The survey found 41% of respondents said Chinese companies were more advanced in adopting AI, with the share rising to 62% in the retail and consumer industry.AmCham Shanghai members only saw overwhelming advantages over their Chinese competition in product quality and development.

Improving business environment

While trade tensions and worries about China's economic slowdown weighed on the near-term outlook, the survey respondents indicated significant improvement in the local regulatory environment.Nearly half, or 48%, said that the regulatory environment was transparent for their industry, a large jump from just 35% in 2024. The share of businesses saying that lack of transparency was hindering operations fell by 12 percentage points to 16%.The share of respondents indicating that foreign and local companies were treated equally rose by 5 percentage points to 37%.

Beijing in recent years has ramped up its efforts to attract and retain foreign investment, with increased engagement and friendlier policy announcements. Earlier this year, China released an "action plan" that included measures for making it easier for foreign businesses to invest in biotechnology, while clarifying standards for government procurement.However, the AmCham Shanghai survey still found that 14% of the respondents reported a worsening environment for foreign business in China, with the tech sector seeing the highest level of challenges at 31% of industry respondents.

Source: CNBC

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Adam

Commodity

Gold advanced as traders awaited US inflation data, rising back toward the record price reached on Tuesday after jobs figures that strengthened the case for interest-rate cuts.

Bullion gained 0.6% to approach $3,650 an ounce, after peaking above $3,674 on Tuesday when a preliminary revision showed that the number of workers on payrolls will likely be revised down by a record 911,000. The Federal Reserve is due to set monetary policy next week, following US producer and consumer inflation prints due on Wednesday and Thursday that will also shape the decision.

Geopolitical risk was also in focus. President Donald Trump told European officials that he’s willing to impose new tariffs on India and China to push Russian leader Vladimir Putin to the negotiating table with Ukraine — but only if EU nations did so as well. Separately, Israel on Tuesday conducted an unprecedented military strike against senior Hamas leaders in Doha.

Bullion has rallied by almost 40% this year on central-bank buying, geopolitical uncertainties, and concerns about the impacts of US tariffs on the global economy. Inflows into gold-backed exchange-traded funds have provided additional support, with many banks including Goldman Sachs Group Inc. predicting further gains in prices as the Fed is expected to cut interest rates.

“Rising risks to the labor market will likely prompt the Fed to maintain its easing stance through to March 2026,” ANZ Group Holdings Ltd. analysts Soni Kumari and Daniel Hynes wrote in a note, raising the bank’s year-end gold forecast by $200 to $3,800.

“We expect continued growth in gold holdings across major markets, including China and India. We project an additional 200 tons of ETF investment for the remainder of 2025,” the ANZ analysts said.

Trump’s bid to extend his influence over the Fed, challenging its independence, has also aided gold. A judge temporarily blocked the president from removing Governor Lisa Cook, allowing her to remain on the job as she challenges the Trump’s efforts to oust her over allegations of mortgage fraud. The decision means Cook can likely attend next week’s FOMC.

Several central banks have signaled their sustained appetite for bullion in recent days, pointing to continued official-sector purchases. This week, the Czech authorities said its gold holdings were at a record, after data showed a rise at the People’s Bank of China. India’s central bank has also increased buying.

Gold was 0.6% higher at $3,647.59 an ounce at 10:37 a.m. in London. The Bloomberg Dollar Spot Index was flat, after edging higher on Tuesday. Silver rose above $41 an ounce, as palladium and platinum also gained.

Source: Bloomberg

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Olivia Brooks

Cryptocurrency

Key takeaways:

Bitcoin broke $114,000 as data showed PPI inflation cooled sharply in August.

Traders believe the data could push the Federal Reserve to cut rates in September.

Long-term onchain trends show short-term turbulence occurring after Fed rate cuts, then longer-term upside.

Bitcoin (BTC) surged above $114,000 for the first time since Aug. 24, extending its recent recovery as US inflation data came in far cooler than expected. The move follows the release of the August Producer Price Index (PPI), which dropped to 2.6% year-over-year versus forecasts of 3.3%. Core PPI, which strips out food and energy, fell to 2.8%, well below the 3.5% consensus.

Source: Cointelegraph/TradingView

On a monthly basis, PPI even turned negative, marking only the second contraction since March 2024, according to the Kobeissi newsletter. Adding to the dovish tone, inflation figures from July were revised lower as well, with headline PPI adjusted to 3.1% from 3.4% and core PPI to 3.4% from 3.7%. In addition to the historic US jobs data revision earlier this week, which erased 911,000 jobs from the past 12 months, markets are viewing interest rate cuts as increasingly imminent.

Market analyst Skew noted that producer inflation trends often lag behind those of the Consumer Price Index (CPI) by one to three months. This means sticky CPI readings could still appear in the short run, though the broader trajectory points to cooling inflation into Q4. While the PPI slowdown is encouraging, hedge flows may continue until CPI confirms the easing trend.

Bitcoin’s historical reaction to Fed rate cuts

With Federal Reserve interest rate cuts looking extremely likely, Bitcoin’s history shows a consistent pattern of turbulence followed by upside. Two onchain metrics, Market Value to Realized Value (MVRV) and Whale Ratio, shed further light.

MVRV compares Bitcoin’s market capitalization to its realized capitalization (the aggregate value at which coins last moved). When MVRV hovers near 1, BTC is typically undervalued, and levels near 3–4 suggest overheated valuations.

Meanwhile, Whale Ratio measures the share of large holder transactions in exchange flows, showing when whales are sending coins to sell or pulling them back for storage.

Source: CryptoQuant

Data from CryptoQuant highlights that in March 2020, interest rate cuts sent MVRV collapsing toward 1 as panic wiped out investors’ speculative gains, while the Whale Ratio spiked on heavy whale selling.

As liquidity flooded in, the MVRV rebounded, and whales shifted to accumulation, fueling Bitcoin’s 2020–2021 bull run. A similar pattern repeated during the late 2024 easing cycle, when both indicators reflected short-term selling before stabilizing into another rally.

If history rhymes, Fed easing in 2025 could again bring initial volatility, but overall provide the liquidity backdrop for Bitcoin to approach new highs.

Source: CoinGecko

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Adam

Stocks

S&P 500 Futures Inch Higher as Traders Eye PPI and Fed Rate Path

Daily E-mini S&P 500 Index

Stock index futures were mixed early Wednesday, with the S&P 500 and Nasdaq 100 inching higher while Dow futures slipped, as investors braced for the first of two critical inflation updates that could set the tone for the Federal Reserve’s next move. With the S&P 500 and Nasdaq closing at record highs on Tuesday, momentum remains positive—but fragile—as attention shifts to the producer price index (PPI) due this morning at 12:30 GMT.

Will the PPI Report Support a September Rate Cut from the Fed?

Today’s PPI release is the first of two inflation readings that could sway the Fed’s rate decision next week. Wall Street expects both headline and core producer prices to rise 0.3% in August, a pace that would signal persistent input cost pressures. Traders are pricing in a 25-basis-point cut at the September 17 FOMC meeting, but hotter-than-expected numbers could cast doubt on that move.

Early Wednesday, the 10-year Treasury yield held at 4.09%, while the dollar and gold were steady—reflecting a wait-and-see mood ahead of the data.

Oracle Rockets on AI Cloud Deals—Can the Rally Hold?

Daily Oracle Corporation

Oracle shares surged 29% premarket after disclosing $455 billion in remaining performance obligations, driven by four multibillion-dollar AI cloud deals. This backlog is up 359% year-over-year. Despite missing Q1 earnings estimates, the company forecast 14%–16% revenue growth for Q2 and expects cloud infrastructure revenue to hit $18 billion this year. Oracle also plans to invest $35 billion in data center expansion, potentially increasing that number based on demand. If the stock holds gains, it would mark Oracle’s best single-day performance since 1999.

UnitedHealth Lifts Dow as Buffett’s Bet Gains Credibility

UnitedHealth jumped 8.6% Tuesday after reaffirming its 2025 earnings outlook and calming fears over Medicare Advantage star ratings. Roughly 78% of its MA plan membership is estimated to fall within the four-star-or-higher category, supporting reimbursement levels. Warren Buffett’s $1.57 billion stake in the insurer has gained 12% in value since Q2, adding to bullish sentiment.

OPEC+ Supply Gains Keep Oil Traders Cautious Despite Middle East Tensions

WTI crude rose modestly to $62.90 a barrel despite geopolitical tensions following Israel’s strike on Hamas leadership in Qatar. Traders remained focused on the supply picture, as OPEC+ raised October output by 137,000 barrels per day. The EIA sees global supply outpacing demand, projecting inventories to build and pressure prices lower heading into year-end.

What’s Next for Markets? Watch CPI and Fed Reaction

The CPI report on Thursday could be the deciding factor for a September rate cut. JPMorgan warns that even a confirmed cut might trigger a “sell-the-news” reaction as investor positioning appears stretched and retail momentum is cooling.

With AI-linked names like Oracle gaining steam and gold drawing renewed interest as a hedge, traders will be monitoring inflation trends, Fed commentary, and retail participation closely to assess sustainability in this record-setting market.