This is great news on the inflation front. It will be very difficult for the economy to generate any sustained rise in core inflation with unit labor costs showing such a high degree of restraint.

The implication is that the economy is strengthening, but that inflation is not substantial, and the Fed will be able to handle it if it should become so.

The economy is strong enough to keep corporate earnings growing, but not so strong that inflation will be a major factor.

[Mortgages] tend to reflect inflation and the overall strength of the economy.

Bearing in mind that the Fed wants higher inflation, the news is not unwelcome. And the market will remain firmly in the camp that the Fed will not tighten soon, ... Nevertheless, the risks from the PPI are easy to see and look real in light of the big decline of the dollar and rise in import costs that preceded them.

The economy has shown tremendous resilience in the face of energy prices so far. But this latest spike will have a noticeable effect in the next couple of months.