‘This Is Concerning’: PPI Scorcher Torches CPI Relief Narrative

A day on from another generationally high read on US consumer prices, data suggested pipeline pressures remained acute in March.

Producer prices rose 11.2% YoY in the world’s largest economy last month, the BLS said (figure below).

That easily exceeded consensus and marked the hottest reading since 12-month data were first calculated more than a decade ago.

The monthly increase, at 1.4%, was also a record.

The ex-food and energy print was 9.2%, nearly a percentage point above estimates. Excluding food, energy and trade, the YoY pace reaccelerated to 7%, matching the highs seen in the final two months of 2021.

The final demand goods gauge rose 2.3% in March, the same outsized monthly gain registered in February (figure below). Over half of that was attributable to a 5.7% leap in final demand energy prices. That was actually cooler than February’s monthly print.

March marked the second straight month during which the goods index notched a record sequential increase.

It was notable that the MoM core PPI print was twice as hot as expected. If you’re so inclined, you could juxtapose that with the cooler-than-anticipated monthly gain on core CPI which served as a silver lining in Tuesday’s otherwise dour consumer price report.

The ex-trade services print was the second highest ever.

Between across-the-board beats on virtually every print and upward revisions to some of February’s key figures, Wednesday’s PPI report was bad news.

Note that a gauge of transportation and warehousing services jumped 5.5%. As the figure (below) makes clear, that was a record. And it wasn’t close.

That suggests supply chain hangups and logistics bottlenecks are far from resolved.

Overall, final demand services prices rose 0.9% in March, triple February’s increase and the fourth monthly gain of at least 0.9% in five.

I could go on, but I doubt there’s much utility in gratuitous editorializing. Wednesday’s wholesale price data cast considerable doubt on the notion that inflation has well and truly peaked in the US.

As BMO’s senior economist, Jennifer Lee, put it, “this is concerning.”

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4 thoughts on “‘This Is Concerning’: PPI Scorcher Torches CPI Relief Narrative

  1. Let’s see: a once in a century pandemic, the beginnings of the great decoupling, the fed’s policies since 2009, and now the most dangerous proxy war since 1962…Oh. and aging populations around the world…

    1. Oh, and amazingly, through it all, the rate of our green house gas emissions keeps increasing.
      We set a record for the amount of increase in methane emissions in 2021:

      It’s possible we’ve pasted a tipping point in methane emissions “NOAA scientists are concerned that the increase in biological methane may be the first signal of a feedback loop caused in part by more rain over tropical wetlands that would largely be beyond humans’ ability to control”.

  2. PPI is about business activity, not money. When (parts) supplies fall, prices rise. Wait, isn’t that Econ 101? The Fed may have more money than God but it ain’t got no missing chips, etc.

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