In this morning’s data, the Producer Price Index (PPI), which measures costs faced by industries that make products rather than those the consumer bears, increased 1.0% in March and has increased 4.2% on an annual basis, both above forecasts. The core PPI, which excludes food and energy prices, increased 0.7% in March and is up 3.1% on an annual basis, also above estimates. The year-over-year figures do reflect the comparison to very low levels seen a year ago at the start of the pandemic. While some price increases in the PPI do not reach consumers as they are absorbed by other parts of the system, the figures do show the direction of inflation may be higher in the short run. It remains to be seen if those increases remain transitory or persist, which will be closely watched by the Federal Reserve in the months ahead to determine if their current accommodative policy needs to be adjusted. In all, bond yields are ticking higher this morning and equity futures are mixed as we head into the market open.
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