In this morning’s data, the Producer Price Index (PPI) increased 0.5% in March, much less than expected, and the same as the previous month’s revised figure. The headline rate increased 4.0% on an annualized basis. The core rate, which excludes food and energy prices, increased 0.1% in March, also less than expected and less than the previous month’s revised figure. On an annual basis, the core rate increased 3.8%, less than expected, and is also the same as the revised annualized rate in the previous month. Looking at the various categories, final demand for goods was relatively strong at the producer level, up 1.6%, driven by higher energy prices, while final demand for services was relatively weak, with no change from the previous month.
Overall, a decent report as inflation at the producer level came in less than expected for March for both the headline and core measures. Considering the elevated cost of oil from the Iran conflict, higher energy prices drove most of the increase in the headline figure, which was offset some by construction. Both annual figures are well above stated targets. As with the CPI last week, the length of time that oil prices remain elevated is a concern for both individuals and businesses, as it can seep into other categories over time. Therefore, the outcome and timing of a resolution to the Iran conflict and its impact on oil prices will be a key dynamic for the markets and global economy over the coming weeks.
In all, the 10-year US treasury yield ticks slightly higher following the report and equity futures are also higher as we head into the market open.
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