Producer Price Acceleration Modest

There is a little more inflation at the wholesale level, including for primary metals, but the acceleration is modest. Producer prices rose 0.3 percent in March which is 2 tenths above Econoday's consensus with ex-food & ex-energy also up 0.3 percent and ex-food, ex-energy & ex-trade services up 0.4 percent, both of which are 1 tenth above consensus.

Part of the pressure does reflect a jump in steel mill products, up 1.9 percent in the month with steel scrap up 4.3 percent. This is no surprise given reports out of the factory sector that steel and aluminum prices jumped in initial reaction to tariffs imposed by the Trump administration.

Another source of pressure, and one not related to tariffs at least in March, was a 2.2 percent wholesale jump in food prices which includes a 32 percent snapback in vegetables which plunged 27 percent the month before. Energy held down prices in the month, slipping 2.1 percent following February's 0.5 percent dip.

And much of today's report doesn't show much pressure at all, including only a 0.2 percent gain for the closely watched trade services subcomponent which tracks price effects at retailers and wholesalers. This year-on-year rate is up only 2.0 percent in contrast to the 3.0 percent overall rate.

Still 3.0 percent is noticeable growth though this reading peaked back in November last year at 3.1 percent. There are hints right now of building capacity stress tied to longer delivery times and lack of highly skilled labor but the pressures are still modest and as yet aren't raising the heat on the Federal Reserve to pick up its rate hike path. Watch tomorrow for March consumer prices where very moderate readings are the expectation.