Summary: Prices received by producers rise by 0.6% in April; double expected figure; “core” PPI increases by 0.7%; annual rate now above 6%; “core” goods prices up by 8.8% annualised over past 3 months; broad range of items “adding to upstream inflation pressure”.
Around the end of 2018, the annual inflation rate of the US producer price index (PPI) began a downtrend which continued through 2019. Months in which producer prices increased suggested the trend may have been coming to an end, only for it to continue, culminating in a plunge in April 2020. Figures returned to “normal” towards the end of that year and annual rates are now well above average.
The latest figures published by the Bureau of Labor Statistics indicate producer prices rose by 0.6% after seasonal adjustments in April. The increase was double the 0.3% rise which had been generally expected although less than March’s 1.0% rise. On a 12-month basis, the rate of producer price inflation after seasonal adjustments increased from 4.3% to 6.1%. (The index fell significantly in April 2020, resulting in a noticeably lower base for annual calculations, i.e. “base effects”.)
PPI inflation excluding foods and energy rose by 0.7% after recording a 0.7% increase in March and a 0.2% increase in February. The annual rate accelerated again, this time from 3.1% to 4.2%.
US Treasury bond yields moved lower on the day. By the close of business, the 2-year yield had slipped 1bps to 0.16%, the 10-year yield had lost 3bps to 1.66% and the 30-year yield finished 1bp lower at 2.41%.
ANZ economist Kishti Sen noted “core” goods prices have “risen at an annualised rate of change of 8.8% based on the data for the past three months.”
The BLS stated higher prices for final demand services accounted for “about two-thirds” of the month’s increase after they rose by 0.6% on average. Prices of final demand goods also rose by 0.6%.