The Bureau of Labor Statistics announced Wednesday that March saw the highest increase in prices for goods and services since records began to be kept.
Producer price index measures wholesalers’ prices and increased by 11.2% over the previous year. This is the highest increase in any data series since November 2010. Monthly, the gauge rose 1.4% above the Dow Jones estimate by 1.1%, a record and also higher than the previous 1.1% Dow Jones estimation.
Core PPI, which excludes food, energy, and trade services was 0.9% in monthly growth. This is almost twice the 0.5% estimate, and it’s the largest monthly increase since January 2021. Core PPI rose 7% over the past year.
PPI can be considered an inflation indicator that is forward-looking. It tracks the prices of goods and services in the pipeline before they reach consumers.
Wednesday’s announcement comes a day after BLS announced that March’s consumer price index rose 8.5% in the past year. This is higher than expected and was the highest level since December 1981.
The producer price of final demand goods saw a 2.3% increase in monthly, while prices for services rose 0.9%. That is sharply higher than the 0.3% February rise. During this period, goods inflation outpaced services. the Covid pandemicHowever, March’s data indicate that services are now on the rise as consumers shift to better service.
The biggest gainer was the increase in energy prices, which rose 5.7%. Food costs rose 2.4%.
The Federal Reserve has tightened monetary policy in response to rising inflation.
As the first of a planned series of increases through 2019, the Fed increased the benchmark short-term borrowing interest rate by 0.25 percent. The market is pricing in the possibility that the central bank will increase its benchmark short-term borrowing rate by 0.25 percentage point at its May meeting. This will be followed up with a series of hikes until the fed funds rates reaches about 2.5% by year’s end.
Initial reaction of the markets to PPI news was neutral. Stock market futures remained flat, and Treasury yields stayed relatively constant.