Wholesale prices unexpectedly declined 0.3% in June on big drop in gasoline

Summary

Rick Santelli breaks down June's PPI data showing a surprise 0.3% decline on lower gasoline prices, with significant downward revisions. Core PPI also missed expectations, while Empire Manufacturing beat forecasts. The softer inflation data led to a drop in Treasury yields and a steepening of the 2s10s yield curve, but Santelli cautions about long-term pressures from rising real rates and debt.

• Headline PPI fell 0.3% vs expected unchanged, largest monthly decline since April 2020.
• Excluding food, energy, and trade, PPI rose only 0.1% vs 0.3% expected.
• Year-over-year PPI fell to 5.5% from a revised 6%, well below forecast.
• Empire Manufacturing surged to 15.6 in July vs 9 expected, near three-year highs.
• Ten-year yield fell to 4.58%, two-year to 4.17%, steepening the 2s10s curve to 41bps.
• Santelli notes rising real rates and sees potential for further yield downside but with caution.