Core PPI Comes in Cool

Excluding food and energy, wholesale prices rose 0.1%.
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Producer prices rose 0.7% in March, slightly higher than the 0.6% expected by Wall Street economists, and above the 0.4% gain in February.

But core inflation, which excludes food and energy prices, remained tame at the producing level, rising 0.1% in the month against expectations for a rise of 0.2%.

The headline PPI was boosted, as expected, by a 3.3% rise in energy prices. Gasoline prices rose 5.3%, home heating oil soared 15.7% and residential natural-gas prices gained 2.3%.

There had been calls for an ugly PPI ahead of the release, which made its broadly in-line headline number appear particularly benign. Excluding food and energy, which is a significant exclusion at this point of the game, core inflation remains tame.

The core rate is still trending higher at an annualized rate of about 2.5%, notes HFE chief U.S. economist Ian Shepherdson. Prices of intermediate goods rose 1% and crude materials advanced 4.3% in March.

"But with core crude materials now up only 0.3% year on year, down from a peak of 32% last August, pipeline pressure is easing," Shepherdson says.