The producer price index (PPI), a measure of prices businesses pay for goods and services, rose by 0.5% in March, according to the Bureau of Labor Statistics (BLS). The increase was significantly lower than economists' expectations of a 1.1% rise, suggesting weaker underlying inflationary pressures than anticipated.
Energy prices were the primary driver of the March increase, with gasoline surging 15.7%, diesel soaring 42%, and jet fuel rising 30.7%. These energy cost hikes accounted for about half of the overall PPI gain. Excluding food and energy, core PPI increased just 0.1%, well below the forecasted 0.5%. On an annual basis, the all-items PPI accelerated 4%, the largest 12-month gain since February 2023, while core PPI posted a 3.8% annual gain.
Services inflation remained flat, a key focus for Federal Reserve policymakers, as businesses absorbed tariff costs. Trade services, which exclude tariffs and war impacts, slipped 0.3% for the month. Meanwhile, portfolio management costs, which had pushed producer prices earlier in the year, rose 1% monthly and 10.8% annually.
Markets showed little reaction to the report, with stock futures on course for modest gains and Treasury yields unchanged. While some inflation indicators for March pointed to renewed pricing pressures, Fed policymakers are likely to assess the underlying picture before making policy decisions, particularly in light of the ceasefire in Iran.