May 21, 2024

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US producer prices rose 2.1% from a year ago, mostly since April, but less than forecasters expected.

US producer prices rose 2.1% from a year ago, mostly since April, but less than forecasters expected.

WASHINGTON (AP) — U.S. producer prices rose in March from a year earlier at the fastest pace in nearly a year, but the gains were smaller than economists had expected. Wholesale inflation fell on a monthly basis.

The Labor Department said Thursday that the producer price index — which measures inflationary pressure before it reaches consumers — rose 2.1% last month compared to March 2023, the largest year-over-year jump since April 2023. But economists expected a 2.2% increase, according to A survey of forecasters conducted by data firm FactSet.

Compared to February, wholesale prices rose just 0.2%, down from a 0.6% gain in February and below economists' expectations of 0.3%.

The slightly better-than-expected producer price reading came as something of a relief, arriving a day after the Labor Department said consumer price inflation was surprisingly hot last month. Wednesday's numbers heightened concerns about stalling progress against inflation and raised doubts about when the Federal Reserve will cut interest rates.

Excluding volatile food and energy prices, core wholesale prices rose 0.2% last month from February, the second straight decline, and 2.4% since March 2023. The year-on-year increase in core producer prices was the largest since then. now. August. Economists see core inflation as a sign of the direction in which overall inflation may be heading.

Wholesale commodity prices fell 0.1% compared to February, dragged down by a 1.6% drop in energy prices. Service prices rose by 0.3% for the second month in a row.

In the face of aggressive interest rate increases by the Federal Reserve, inflation has declined steadily after peaking in mid-2022. But improvements have recently proven difficult to achieve.

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The Labor Department reported Wednesday that the Consumer Price Index rose 3.5% last month from a year earlier, the second straight increase in year-over-year inflation, which remains stuck well above the Federal Reserve's 2% target. Consumer prices rose 0.4% last month compared to February, which is consistent with the increase in January. It has not decreased on a monthly basis since October.

In an effort to combat the resurgence of inflation that began in the spring of 2021, the Fed raised its benchmark interest rate 11 times between March 2022 and July 2023, raising it to its highest level in 23 years. The central bank has indicated it expects to cut interest rates three times this year — a policy reversal that has been eagerly awaited on Wall Street. But the recent stubbornness of inflation has cast doubt on when interest rate cuts will begin and whether the Fed will really be able to squeeze three of them this year.

Wall Street investors had originally hoped to see their first rate cut in March. But this did not happen, and inflation numbers stabilized. Now a majority of investors don't expect interest rates to be cut until the Fed's September meeting, according to CME's FedWatch tool.

George Ball, president of investment firm Sanders Morris, called Thursday's producer price report “encouraging” but said “the Fed will take its time when it comes to lowering interest rates.”