US PPI Inflation Slows Sharply to 2.6%—Cooling More Than Expected

US producer prices cooled sharply in August, with PPI up 2.6% YoY and -0.1% MoM, both softer than forecasts. Markets read it as disinflationary and leaned toward easier policy. Equity sensitivity is front and center: S&P 500 (Zorrox: SPX500.), Dow Jones 30 (Zorrox: WS30.), and Nasdaq 100 (Zorrox: NQ100.) all trade on how quickly the Fed pivots.

Deflationary Pressures at the Producer Level

The negative monthly print points to easing pressure at the wholesale layer. Services led the downside with weaker margins in categories like machinery and vehicles, while goods were flat-to-mildly higher and energy slid again. The picture is simple: pipeline inflation is losing steam.

Fed Rate Cut Odds Rise

A cooler PPI tilts the table toward a quarter-point cut at the next meeting. Rate-sensitive assets priced in better odds of relief, and risk appetite improved. The policy debate now turns on whether the Fed moves preemptively or waits for confirmation from consumer prices and labor data.

Core Inflation Eases, but Sticky

Core PPI (ex food, energy, and trade services) rose 2.8% YoY and fell 0.1% MoM—directionally soft, but not a slam dunk. Underlying pressures are easing, just not uniformly. Markets will want to see a string of softer core reads before declaring mission accomplished.

Outlook: Tariffs vs. Demand

The print undercuts the claim that tariffs are mechanically inflating prices—at least for now. Weak demand and corporate margin absorption are likely delaying pass-through. The next CPI is the decider: if consumer-side stickiness persists, the Fed’s path could still be bumpy.

Tips for Traders

• S&P 500 (Zorrox: SPX500.) tends to bid on softer PPI; fade chases if breadth and earnings revisions don’t confirm.

• Dow Jones 30 (Zorrox: WS30.) benefits from a clean “soft landing” read; watch cyclicals versus defensives on cut odds.

• Nasdaq 100 (Zorrox: NQ100.) is most sensitive to lower real yields; monitor leadership concentration and volatility skew.

• Track 2s–10s steepening on cut pricing; sustained steepeners often precede factor rotations.

• Use CPI and claims as validation—one soft PPI isn’t a trend; size positions accordingly.