- The Beige Book is published eight times a year by the Federal Reserve
- The Producer Price Index rose 8.3% on an annual basis in August
- Natural gas futures contract prices last week hit their highest level in seven years
Top Three Market Headlines
Beige Book Sounds Cautionary Tone: The Federal Reserve last week released its most recent Beige Book, a compilation of anecdotal information about current economic conditions collected eight times a year by the 12 Federal Reserve Districts. The report indicated that developing pressures have hindered the economic recovery in recent months, including the effect of the Covid-19 delta variant on spending for tourism, dining out, and travel. In addition, on-going supply problems and labor shortages have dented production in some sectors and driven costs higher, which companies reported they are covering by hiking prices.
Producers Face Continued Pricing Pressures: The Bureau of Labor Statistics (BLS) last week reported August figures for the Producer Price Index (PPI), which measures the average change in prices received by domestic producers. The index rose 0.7% from the prior month (seasonally adjusted), a slight downshift from June and July, which saw increases of 1.0% each. The core index, excluding food and energy, also decelerated, rising 0.6% in August versus increases of 1.0% in each of the prior two months. Despite the slowing monthly advance, however, annual price gains were the highest since 2010, with the broad and core indices rising 8.3% and 6.7%, respectively, over the prior year.
Natural Gas Prices Rally: Natural gas prices hit a seven-year high last week as the benchmark futures contract briefly surpassed $5.00 per million British thermal units (mmBtu). Prices have surged approximately 25% since late August and are now more than double their level of 12 months ago. Keying the rally has been rising international demand, which has spurred greater U.S. exports of liquefied natural gas. This has drained U.S. supplies, which was reflected in a report last week from the U.S. Energy Information Agency that the level of natural gas in underground storage was 7.4% below the five-year average. This shortfall is not likely be overcome in the near-term, as about three-quarters as production in the Gulf of Mexico remains off-line due to Hurricane Ida.