Markets Get More Bad News As Pipeline Inflation Pervasive

US producer prices accelerated at a double-digit annual pace for the fifth consecutive month in April, data out Thursday showed.

The final demand gauge rose 11% on a 12-month basis. That was hotter than expected. Consensus saw 10.7%.

If you’re feeling generous, you could suggest we’ve seen the peak. The simple figure (below) gives you some context.

The core gauge rose 8.8% from April of 2021. Ex-food, energy and trade, the YoY increase was 6.9%. That too was hotter than anticipated. Economists expected 6.6%. March’s figures were revised materially higher.

Mercifully, the MoM readings were in line. The headline gauge rose 0.5% from March, down markedly from the prior month’s upwardly-revised 1.6% increase (figure below). Core was up 0.4% from a month earlier.

The MoM read on the ex-food, energy and trade gauge was 0.6%, likewise cooler than the prior month’s pace.

Drilling quickly down, the 1.3% monthly increase in the final demand goods gauge was the fourth consecutive rise, but it was also the smallest increase of the four. Indexes for cars and equipment, diesel, chicken eggs, jet fuel, electric power, and residential natural gas, all rose, while the gasoline index fell. As was the case with CPI on Wednesday, the drop in the gasoline gauge is old news with pump prices back to records. The increase in the final demand energy gauge was the smallest of 2022.

Notably, the final demand services gauge was flat from March, but the breakdown wasn’t amenable to celebration. Trucking freight costs rose more than 4%.

Separately, jobless claims were ahead of estimates at 203,000.

All in all, Thursday’s data did nothing to change the calculus for the Fed. Pipeline price pressure is pervasive, which, when taken in conjunction with April’s hot CPI report, suggests the world’s largest economy is a long way away from normalcy on the inflation front. And the Fed is on the wrong side of neutral when it comes to alleviating the strain.

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