Producer Prices Plunged Most Since COVID In March

Following the cooler-than-expected consumer price inflation print, producers prices were expected to accelerate modestly in March. The analysts were totally wrong…

Headline PPI fell (yes fell) 0.4% MoM (dramatically cooler than the 0.2% MoM rise expected), dragging the headline index down to +2.7% YoY…

Source: Bloomberg

That is the lowest MoM print since COVID lockdowns and lowest YoY since Sept 2024… as Energy and Services costs tumble…

Core PPI also saw deflation (-0.1% MoM) with the YoY rise slowing to +3.3%…

In March, over 70 percent of the decrease in the index for final demand can be traced to prices for final demand goods, which fell 0.9 percent. 

The index for final demand services declined 0.2 percent.

Final demand goods: Prices for final demand goods moved down 0.9 percent in March, the largest decrease since falling 1.4 percent in October 2023. Over three-fourths of the March decline is attributable to a 4.0-percent drop in the index for final demand energy. Prices for final demand foods decreased 2.1 percent. In contrast, the index for final demand goods less foods and energy rose 0.3 percent.

Product detail: Two-thirds of the March decline in the index for final demand goods can be traced to an 11.1-percent drop in prices for gasoline. The indexes for chicken eggs, beef and veal, fresh and dry vegetables, diesel fuel, and jet fuel also moved lower. Conversely, prices for steel mill products increased 7.1 percent. The indexes for residential electric power and for processed young chickens also advanced.

Final demand services: Prices for final demand services fell 0.2 percent in March, the largest decline since moving down 0.2 percent in July 2024. Leading the March decrease, margins for final demand trade services dropped 0.7 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand transportation and warehousing services moved down 0.6 percent. In contrast, the index for final demand services less trade, transportation, and warehousing increased 0.1 percent.

Product detail: A 1.3-percent decrease in the index for machinery and vehicle wholesaling was a major factor in the March decline in prices for final demand services. The indexes for airline passenger services; food retailing; apparel, jewelry, footwear, and accessories retailing; automobiles retailing (partial); and guestroom rental also moved lower. Conversely, prices for legal services rose 1.5 percent. The indexes for chemicals and allied products wholesaling and for long-distance motor carrying also advanced.

Margin pressure remains on American corporations…

Finally, energy prices are set to drag CPI and PPI even lower in the next month or so…

But, but, but… the PhDs said tariffs were inflationary!!