WASHINGTON (AP) — U.S. producer prices rose at their fastest pace in nearly a year in March, but gains were smaller than economists had expected. Also headline price inflation declined on a month-on-month basis.
The Labor Department said Thursday that its producer price index — which measures inflationary pressures before they reach consumers — rose 2.1% last month from March 2023, the biggest year-over-year improvement since April 2023. But economists had forecast a 2.2% increase. A survey of forecasters by data firm FactSet.
Compared to February, wholesale prices rose just 0.2%, falling short of a 0.6% gain in February and the 0.3% expected by economists.
The slightly better-than-expected producer price increase came as a relief, a day after the Labor Department reported that consumer price inflation had surprisingly warmed last month. Wednesday's numbers added to concerns that progress against inflation is stalling and raised doubts about when the Federal Reserve will cut interest rates.
Stripping out volatile food and energy prices, so-called core wholesale prices rose 0.2% last month from February, the second straight decline, and rose 2.4% from March 2023. Year-on-year increases in core producer prices were high. August. Economists look at core inflation as an indication of where overall inflation is headed.
Wholesale commodity prices fell 0.1% from February, followed by a 1.6% decline in energy prices. For the second month in a row, prices of services increased by 0.3%.
In the face of aggressive central bank rate hikes, inflation has eased steadily after peaking in mid-2022. But improvements have recently proven hard to come by.
The Labor Department reported on Wednesday that its consumer price index rose 3.5% last month, the second straight increase in year-over-year inflation, well above the central bank's 2% target. Consumer prices rose 0.4% last month from February, matching January's increase. They haven't fallen on a monthly basis since October.
Combating a resurgence of inflation that began in spring 2021, the central bank raised its key interest rate 11 times between March 2022 and July 2023, pushing it to a 23-year high. The central bank has signaled it expects to cut rates three times this year — a reversal in policy eagerly anticipated on Wall Street. But inflation's recent stubbornness has raised doubts about when the rate cuts will begin and whether the central bank can actually squeeze in three of them this year.
Wall Street investors initially hoped to see the first rate cut in March. But that hasn't happened, and inflation numbers have plateaued. Most investors now don't expect a rate cut until the Fed's September meeting, according to CME's FedWatch tool.
George Paul, of investment firm Saunders Morris, called Thursday's producer price report “encouraging” but said the “Federal Reserve will take its time when it comes to rate cuts.”
