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Economy in Brief

U.S. PPI Posts Broad-Based Strength in March
by Tom Moeller  April 9, 2021

• Core finished goods inflation picks up.

• Energy prices surge.

• Service price inflation strengthens.

The Producer Price Index for final demand jumped 1.0% (4.2% y/y) during March following a 0.5% February improvement. The index has risen at an 11.9% annual rate during the last three months. A 0.5% rise had been expected in the Action Economics Forecast Survey. The PPI excluding food & energy strengthened 0.7% (3.1% y/y) after increasing 0.2% in February. The index rose at an 8.3% annual rate during the last three months. A 0.2% rise had been expected. The PPI less food, energy & trade services rose 0.6% (3.1% y/y) after increasing 0.2% in February.

Energy prices surged 5.9% (24.3% y/y), about as they did in February. Gasoline prices increased 8.8% (52.5% y/y) while the costs of home heating oil improved 4.7% (32.9% y/y). The cost of natural gas rose 1.8% (7.6% y/y).

Food prices improved 0.5% last month (5.1% y/y) after surging 1.3% in February. Pork prices improved 4.7% (13.7% y/y) while egg prices increased 10.3% (7.9% y/y). Dairy product prices rose 0.3% (-1.9% y/y) but beef & veal prices declined 4.3% (+14.6% y/y), after spiking 13.0% in February.

The 0.7% strengthening in the core PPI reflected 0.9% rise (3.6% y/y) in goods prices less food & energy. Core government goods prices increased 1.0% (2.8% y/y). Core consumer goods prices rose 0.5% (2.2% y/y) following a 0.1% uptick. The cost of core nondurable consumer goods increased 0.5% (1.9% y/y) while durable consumer goods prices improved 0.3% (2.7% y/y). Private capital equipment prices edged 0.1% higher (1.6% y/y).

Services prices increased 0.7% (3.0%) in March following a 0.1% uptick. Trade services strengthened 1.0% (3.3% y/y) after a 0.1% improvement. The price of transportation & warehousing of finished goods for final demand surged 1.6% (6.0% y/y) following a 0.2% rise.

Construction costs rose 0.5% (1.5% y/y) following a 0.3% rise.

Intermediate goods prices surged 4.0% in March (12.5% y/y) following a 2.7% rise. These gains were bolstered by the strength in energy prices.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver's USECON database. Further detail is contained in PPI and PPIR. The expectations figures are available in the AS1REPNA database.

Producer Price Index (SA, %) Mar Feb Jan Mar Y/Y 2020 2019 2018
Final Demand 1.0 0.5 1.3 4.2 0.2 1.7 2.9
   Excluding Food & Energy 0.7 0.2 1.2 3.1 0.9 2.1 2.6
   Excluding Food, Energy & Trade Services 0.6 0.2 1.2 3.1 0.7 2.0 2.8
   Goods 1.7 1.4 1.4 7.0 -1.4 0.4 3.4
      Foods 0.5 1.3 0.2 5.1 1.4 1.9 0.2
      Energy 5.9 6.0 5.1 24.3 -12.9 -4.6 10.2
    Goods Excluding Food & Energy 0.9 0.3 0.8 3.6 0.7 1.4 2.5
   Services 0.7 0.1 1.3 3.0 0.9 2.3 2.6
      Trade Services 1.0 0.1 1.0 3.3 1.7 2.4 1.8
   Construction 0.5 0.3 0.2 1.5 2.3 5.0 4.1
Intermediate Demand - Processed Goods 4.0 2.7 1.7 12.5 -2.8 -1.4 5.3
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