Cowen’s Outlook on the PPI Spike
What happened
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The Producer Price Index (PPI) jumped from about 2.3% to 3.3%, well above expectations.
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PPI measures inflation earlier in the supply chain, while CPI tracks what consumers pay.
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CPI barely moved - meaning upstream inflation hasn’t fully reached consumers yet.
Cowen’s view
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Businesses are feeling higher costs but many can’t pass them on.
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Consumers are resisting high prices - sales at Chipotle and Sweetgreen are falling.
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Cheaper options like Domino’s are gaining traction as people look for value.
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This could delay CPI from rising, but it might only be temporary.
Market reaction
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The sell-off started right when the PPI data came out.
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Cowen thinks markets will stay optimistic until CPI jumps - then sentiment could shift quickly.
The Fed angle
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He still expects a September rate cut.
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But warns it could lift long-term yields if inflation expectations grow, repeating last year’s mistake.
Bottom line from Cowen
Markets are likely to keep their cool - until the data forces them to face rising inflation head-on.
