What Happens to S&P 500 Equal Weight (RSP) When PPI Turns Negative?
What happens when Producer Price Index turns negative? Deflation risk, margin implications, and the leading signal for CPI disinflation.
How S&P 500 Equal Weight (RSP) Responds
Scenario Background
The Producer Price Index (PPI) measures wholesale prices received by domestic producers. PPI typically leads CPI by 3 to 6 months because producer input costs eventually pass through to consumer prices. A negative PPI print (goods deflation at the wholesale level) signals imminent disinflation or deflation risk in consumer prices.
Read full scenario analysis →Historical Context
PPI turned negative YoY in 2009 (recession-driven), 2015-2016 (oil crash), and 2020 (COVID shock). The 2022-2023 cycle saw PPI peak at 11.7% YoY and decelerate to negative territory briefly in summer 2023 as energy prices collapsed. Prolonged PPI deflation in Japan (1990s-2010s) coincided with their extended economic stagnation. The 1980s saw PPI deflate during the Volcker-era disinflation, confirming broader inflation normalization.
What to Watch For
- •PPI final demand declining for 3+ consecutive months YoY
- •ISM Manufacturing Prices Paid below 50
- •Commodity prices (CRB Index) declining sharply
- •Core goods CPI turning negative alongside PPI
- •China PPI persistently deflationary
Other Assets When PPI Turns Negative
Other Scenarios Affecting S&P 500 Equal Weight (RSP)
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