Producer prices rose 0.5% in April. March PPI has been revised downward. Services accounted for nearly 75% of the PPIPPI increase, up 2.2% year-on-year.
WASHINGTON (Reuters) – U.S. producer prices rose more than expected in April as costs for services such as portfolio management and hotel accommodations rose sharply, suggesting inflation remained high at the start of the second quarter. It was shown that
A report released Tuesday by the Labor Department also showed that wholesale commodity prices rose steadily last month, even as food prices fell. Traders lowered their expectations for a September interest rate cut from the U.S. Federal Reserve after a recent survey showing rising inflation expectations.
“Producer-level inflation has come to the fore once again this month, and consumers are sure to take advantage of the heat as higher production costs feed into the inflation of the goods and services they purchase,” said Christopher Rupkey, chief economist at FWDBONDS. You must be feeling that,” he said. . “Even if Fed officials were seeking some relief from the inflation explosion in the first quarter, that trend has not materialized at the beginning of the second quarter.”
The final demand producer price index rose 0.5% last month, after a downward revision of 0.1% in March, according to the Labor Department’s Bureau of Labor Statistics.
Economists polled by Reuters had expected the PPI to rise 0.3%, following a 0.2% rise in March. The 0.6% rise in services accounted for nearly three-quarters of the PPI increase. April’s rise was the largest since July 2023 and followed a 0.1% decline in March. PPI rose 2.2% in the 12 months to April after rising 1.8% in March.
Inflation slowed for much of last year, but surged in the first quarter on strong domestic demand. Economists blamed the decline mainly on a combination of companies raising prices earlier in the year and providers of services such as auto insurance catching up with higher costs. They are optimistic that inflation will return to a downward trend this quarter as the labor market cools. That hope was echoed by Federal Reserve Chairman Jerome Powell, who said at a banking event in Amsterdam that he “expects inflation to fall again.” On a monthly basis, it has risen to a level close to last year’s low reading. ”But Powell added, “I would say my confidence in that is not that high.”
Stock prices on Wall Street were rising. The dollar fell against a basket of currencies. US bond prices rose. The probability that financial markets will cut interest rates in September is about 60%, down from 64% before the PPI data.
Some economists think the Fed could make its first rate cut in July. Earlier this month, the U.S. central bank kept its benchmark overnight interest rate unchanged at its current range of 5.25% to 5.50%, where it has been since July. The Fed has raised its policy interest rate by 525 basis points since March 2022.
Inflation Gauge Vegetables photographed at the produce store at Reading Terminal Market on February 19, 2022 in Philadelphia, Pennsylvania, USA. REUTERS/Hannah Baier/File Photo Purchase License Rights, opens in a new tab
Focus on CPI data
Wednesday’s consumer price data could provide new clues about the timing of a long-awaited interest rate cut.
A 0.6% rise in prices of services, excluding trade, transport and warehousing, accounted for 70% of the rise in services inflation. This primarily reflects a 3.9% increase in portfolio management fees following a 0.6% increase in March, following the recent rally in the stock market.
Hotel and motel room rates rebounded 2.4% after falling 1.4% in March. The cost of transporting freight by road has also increased. However, airline wholesale passenger fares fell 3.8% after rising 1.7% in March. Health and medical insurance costs rose 0.2% after recording a similar increase in March.
Non-life insurance prices rose 0.1%. This followed a 0.4% rise in March.
Trade services margin, which measures the change in margins received by wholesalers and retailers, increased by 0.8%. However, costs for transportation and warehousing services fell by 0.6%.
Factors included in the Personal Consumption Expenditure (PCE) price index calculation include portfolio management fees, medical expenses, hotel and motel accommodations, insurance, and airfare. The PCE price index is an inflation measure tracked by the Fed toward a 2% target.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: “Profit margins remain 33% above their 2019 average level, reflecting an improvement in nominal GDP relative to pre-pandemic trends.” Ta. “We expect profit margins to decline gradually over next year as cash-strapped households try harder to make money and retailers compete for market share.” Commodity prices rose by 0.2 in March. %, then rose 0.4%. This was driven by a 2.0% rise in energy product prices. Wholesale gasoline prices recovered by 5.4%, but natural gas prices fell by 3.2%. Food prices fell by 0.7%.
Commodity prices excluding food and energy were flat in March, but rose 0.3%. The PPI, a narrower measure that excludes components of food, energy and trade services, rose 0.4% in April after rising 0.2% in March. Core PPI rose 3.1% year-on-year, following a 2.8% rise in March and the largest increase since April 2023.
Based on PPI data, economists estimated that the core PCE price index could rise by 0.2% or 0.3% in April, after rising 0.3% in March. That would push core inflation up by about 2.8% from a year ago, matching the rise in March. These predictions may change once April CPI data is released.
“Inflationary pressures remain significant and the momentum that has built up over the past few years continues,” said Bill Adams, chief economist at Comerica Bank.
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Report by Lucia Mutikani. Editing: Andrea Ricci
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