US March PPI Worse Than Expected

WASHINGTON (MNI) - The U.S. March US producer price index (PPI) was worse than expected but we doubt it represents the start of a surge in inflation because pipeline pressures are absent and because some costs should reverse.

March final demand PPI was +0.5% for +1.4% over the year, and core (less food & energy) was +0.6% for a similar +1.4% pace over the year.

Both monthly gains were bigger than expected and the year's pace picked up to the fastest since August 2013 in overall PPI.

Still, the PPI remains slow in a broader context despite this one-month jump as a number below +2% still represents slow inflation.

Foods posted +1.1% as pork, hay, and milk rose. Energy was -1.2% on the back of lower liquefied petroleum gas, diesel, gas, and electricity.

Services posted +0.7% as trade margins rose in chemicals, apparel, and food, and as financial services costs jumped. Financial costs are ill-measured and probably stem from the spike in interest rates that since has reversed.

Overall the PPI was worse than expected, but we'd downplay this as a one-month surge. Intermediate prices were declining outside of services. Processed goods posted -0.2% and unprocessed -0.1%.

--Email: jplocek@mni-news.com

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