Why Etsy Stock Is Falling Today

What happened 

Shares of the e-commerce marketplace company Etsy (ETSY -5.74%) were sliding today likely as investors grew increasingly worried about the economy. 

The Labor Department released the latest Producer Price Index data today, which showed that wholesale prices rose faster than expected last month.

Etsy’s stock was down by 4.5% as of 1:50 p.m. ET. 

So what 

The Producer Price Index rose 0.3% in November — which was higher than the 0.2% increase that economists were expecting — and it means that some prices continue to rise despite the Federal Reserve’s efforts to bring inflation down. 

Like the Consumer Price Index, which is a more closely watched indicator for inflation, the Producer Price Index is also an economic gauge of how prices are rising or falling. 

The latest Consumer Price Index numbers will be available on Tuesday, and investors are now worried that it will show rising prices as well. 

Etsy investors are on edge right now as ongoing inflation will encourage the Federal Reserve to continue raising interest rates, likely through 2023. The Fed meets next week to decide on the next rate hike and is expected to increase interest rates by 50 basis points. 

Etsy’s business is dependent on consumers being willing to open their wallets and spend money on mainly non-essential items. More interest rate hikes could end up tipping the economy into a recession and ultimately hurt sales on Etsy’s online marketplace. 

Now what 

In addition to the Producer Price Index moving in the wrong direction, the CEOs of Bank of America and Wells Fargo said earlier this week that they’re seeing consumer spending slow down. Both CEOs are expecting a recession in the U.S. next year. 

All of this news is causing some investors to worry that Etsy’s e-commerce business will soon have to weather an economic slowdown.