Producer Price Index Falls In March

A rise for energy prices wasn't enough to pull producer prices, which are continuing to suffer from the global deflationary pull, into the positive column. Producer prices fell 0.1 percent in March for a year-on-year rate that is also at minus 0.1 percent. Excluding food & energy, prices also fell 0.1 percent with the year-on-year rate at plus 1.0 percent in what is a 2 tenths decline from February's year-on-year rate. When excluding food, energy and trade services, prices were unchanged for a year-on-year rate of plus 0.9 percent which is also unchanged. Energy prices jumped 1.8 percent for a year-on-year rate of minus 13.8 percent that is 8 tenths better than February. But a very key weakness in the report is a 0.2 percent drop for services which is the first decline for this usually stable reading since October last year. March's dip for services reflects declines for fuels, chemicals, and machinery. Year-on-year, wholesale service prices are up only 1.2 percent. Oil prices may be on the move higher but their immediate impact on the price picture, based on the wholesale sector, is minimal at best. Inflation remains subdued, justifying the Fed's wait-and-see rate hike policy.

Recent History Of This Indicator:
Helped by gains for oil-related prices, the headline for March's producer prices report is expected to rise 0.3 percent in March after slipping 0.2 percent in February. The core rate is expected to bounce 0.2 percent higher after coming in unchanged in February, a month when service prices were especially soft. Service prices, stalled at a 2.5 percent year-on-year rate, will have to pick up in order to lift overall prices.