Unexpectedly, wholesale prices experienced a decline in March, fostering a more favorable inflation environment as President Donald Trump escalated tariffs against various U.S. trading partners, according to a report released by the Bureau of Labor Statistics on Friday.
The producer price index (PPI), an important gauge of inflationary pressures in the production pipeline, dropped a seasonally adjusted 0.4% for March, following a slight increase of 0.1% in February. Economists surveyed by Dow Jones had anticipated a modest rise of 0.2%. This marks the first decrease in the PPI since October 2023.
When factoring out food and energy, the core PPI also reported a reduction, declining by 0.1%, contrasting with the expected increase of 0.3%. The index, excluding food, energy, and trade services, nonetheless showed a marginal increase of 0.1%.
The news boosted stock market futures and Treasury yields, reflecting a positive investor reaction.
A significant portion of the drop in final demand prices, over 70%, was attributed to a 0.9% decrease in goods prices, a crucial element monitored by policymakers for inflation trends. This was largely driven by a substantial 11.1% dip in gasoline prices, while service prices also saw a decrease of 0.2%.
Despite these indicators, inflation remains above the Federal Reserve’s target of 2%. The headline PPI indicated a year-over-year rate of 2.7%, while the index, excluding food, energy, and trade services, showed a slightly elevated rate of 3.4%.
The inflation data from March may be interpreted as somewhat outdated in the context of Trump’s unpredictable trade policies. The president announced a sweeping 10% tariff on all imports, alongside specific duties against multiple trading partners. On Wednesday, he modified his approach to what he described as “reciprocal” tariffs, allowing for a 90-day negotiation period in an attempt to address the U.S. trade deficit.
Additionally, the Bureau of Labor Statistics reported Thursday a decrease in consumer price pressures, with a headline drop of 0.1% resulting in a 2.4% rate and a core reading of 2.8%, marking the lowest level in four years.
On a related note, Minneapolis Fed President Neel Kashkari, during a Finance Newso interview on Friday, described elements of the CPI report as revealing “a lot of good news under the hood.” However, he cautioned that the inflation data can become “pretty stale, pretty quickly,” especially in light of the evolving tariff landscape.
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