PPI Surges Despite CPI Dip, Inflationary Pressures Persist
Following yesterday's surge in the Consumer Price Index (CPI), the PPI also increased, with headline producer prices rising 0.2% Month-over-Month (MoM) compared to the expected 0.3% MoM, pushing the Year-over-Year (YoY) PPI to +2.1% from the expected +2.2% - marking the highest level since April 2023.
Core CPI rose 2.4% YoY, hotter than the expected 2.3%, making it the third consecutive hotter-than-expected core PPI print.
Services prices rose while goods prices declined MoM. Final demand services increased by 0.3% in March, driven by rises in prices for various services, including securities brokerage and investment advice, while goods prices fell by 0.1%, mainly due to a decline in energy prices.
However, the 1.6% MoM decline in energy costs seems peculiar given the soaring prices for crude oil and gasoline.
One notable factor contributing to the rise in services prices was the increase in prices for securities brokerage, dealing, investment advice, and related services by 3.1%.
On a YoY basis, services costs are accelerating, setting the stage for potential pressure on the Personal Consumption Expenditures (PCE) and possibly bringing June rate adjustments back into consideration.
Despite some finding solace in the 'cooler than expected' headline PPI print, the core PPI remains high, suggesting ongoing inflationary pressures, contrary to the preferences of both the Federal Reserve and the Biden administration.