Summary: Prices received by producers jump in March; double expected figure; smaller “core” PPI increase; US Fed expects rises to be transitory; rise in good prices attributable to higher energy prices.
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 the year and annual rates are now above average.
The latest figures published by the Bureau of Labor Statistics indicate producer prices jumped by 1.0% after seasonal adjustments in March. The increase was double the 0.5% rise that had been generally expected and double February’s 0.5%. On a 12-month basis, the rate of producer price inflation after seasonal adjustments increased from 2.8% to 4.3%.
PPI inflation excluding foods and energy rose by 0.7% after recording a 0.2% increase in February and a 1.2% increase in January. The annual rate accelerated again, this time from 2.5% to 3.1%.
Longer-term US Treasury bond yields moved modestly higher on the day. By the close of business, the 10-year yield had gained 3bps to 1.66% and the 30-year yield had added 2bps to 2.33%. The 2-year yield finished unchanged at 0.15%.