Level 1 — Absolute Beginner
Every month, the government checks prices. This report is about prices that businesses pay, not prices in stores.
In July, these prices did not go up at all. Experts thought they would go up a little.
This is good news. It means inflation, or rising prices, might be slowing down.
Because of this news, stock prices went up. People were also waiting to hear news from a big company called Applied Materials.
- government
- the group of people who run and manage a country
- price
- the amount of money something costs
- business
- a company that makes or sells things
- month
- one of the twelve parts of a year
- expert
- a person who knows a lot about a subject
- inflation
- when prices go up over time
- stock
- a small part of a company that people can buy
- company
- a business that sells products or services
Level 2 — Elementary
The Producer Price Index, a report that tracks prices businesses pay for goods and services, stayed flat in July, meaning prices did not rise at all that month.
Economists had expected prices to rise by 0.2%, so the flat reading was a pleasant surprise and a sign that inflation pressure is easing.
On a yearly basis, the index rose 4.7%, down from 5.5% in June, continuing a trend of slowing price increases across the economy.
Stock markets rose on the news, while oil prices fell, and investors turned their attention to earnings from Applied Materials, a major maker of equipment used to build computer chips.
- track
- to follow and record changes in something over time
- flat
- showing no change or increase
- pleasant surprise
- something unexpected that turns out to be good
- ease
- to become less severe or intense
- yearly basis
- measured or compared over the period of one year
- trend
- a general direction in which something is developing
- investor
- a person who puts money into something to earn a profit
- equipment
- the tools or machines needed for a particular purpose
Level 3 — Intermediate
The Producer Price Index, a closely watched gauge of wholesale inflation, came in flat for July, undercutting the 0.2% increase that economists polled by Dow Jones had forecast, and reinforcing the narrative of cooling price pressures that began with the previous day's consumer inflation report.
On an annual basis, producer prices rose 4.7% in July, a marked deceleration from June's 5.5% pace, offering investors further evidence that the inflationary surge of recent years continues to unwind.
Equity markets responded favorably to the data, with major indexes climbing while crude oil prices slipped, as traders weighed the report alongside a fresh wave of corporate earnings.
Attention has now shifted to Applied Materials, a leading supplier of semiconductor manufacturing equipment, whose fiscal third quarter results are due after the closing bell, with analysts projecting revenue of roughly $8.95 billion and earnings of about $3.36 per share.
- gauge
- a measure or indicator of the size or level of something
- undercutting
- coming in lower than an expected or set level
- forecast
- a prediction of what will happen in the future
- deceleration
- a reduction in speed or rate
- unwind
- to gradually come undone or resolve
- equity markets
- financial markets where shares of companies are bought and sold
- corporate earnings
- the profits a company reports for a given period
- semiconductor
- a material used to make computer chips and electronic devices
Level 4 — Advanced
The Bureau of Labor Statistics' July reading of the Producer Price Index, a closely scrutinized barometer of wholesale inflation, registered no month over month change whatsoever, a result that fell conspicuously short of the 0.2% increase economists surveyed by Dow Jones had projected and that further entrenched the disinflationary narrative established by the preceding day's consumer price data.
Measured year over year, producer prices climbed 4.7% in July, a pronounced deceleration from June's 5.5% pace, lending additional credence to the view among market participants that the inflationary pressures which dominated economic discourse in recent years are steadily unwinding.
Equity benchmarks advanced on the release while crude oil prices retreated, as traders synthesized the softer than expected inflation print with a concurrent wave of corporate earnings disclosures, a confluence that has periodically driven outsized single day market moves throughout the reporting season.
Market attention has since pivoted to Applied Materials, a bellwether supplier of semiconductor fabrication equipment whose fortunes are widely read as a proxy for capital expenditure trends across the chip industry, with its fiscal third quarter results, due after the closing bell, expected to reveal whether the artificial intelligence driven capex boom continues to offset broader cyclical headwinds in the sector.
- barometer
- something that reflects or indicates changes in a situation
- disinflationary
- relating to a slowing of the rate of inflation
- credence
- belief in or acceptance of something as true
- benchmark
- a standard or index against which performance is measured
- confluence
- the coming together of two or more things
- bellwether
- something that indicates a trend or leads the way for others
- capital expenditure
- money a company spends to acquire or upgrade long term assets
- cyclical headwinds
- difficulties or pressures caused by recurring economic cycles