Wholesale inflation rose in March to three year-high
By Alicia Wallace, CNN
(CNN) — Fast-rising oil prices sent US businesses’ costs higher in March, lifting wholesale inflation to 4%, the highest annual rate in three years, according to Bureau of Labor Statistics data released Tuesday.
The Producer Price Index, which measures the average change in prices received by producers of goods and services, rose 0.5% from February, the same pace seen the month before. A 15.7% rise in gasoline prices accounted for nearly half of last month’s increase.
“The quickening can be attributed to energy inflation, or the oil shock associated with the war in Iran; but wholesale inflation was on a bit of a tear before the conflict in Iran began, rising month over month since November,” Elizabeth Renter, senior economist at NerdWallet, wrote in commentary issued Tuesday.
She added: “Inflation wasn’t fully under control before the war began, and it’s certainly not contained now.”
Still, despite wholesale inflation hitting a three-year high, the March PPI report fared better than economists had expected. They estimated that the war-driven energy shock would cause prices to jump 1.1% from February, driving the annual rate to 4.6%, according to FactSet consensus estimates.
Instead, Tuesday’s report showed that falling food prices and flat services prices helped to blunt some of the blow from the rapidly rising oil prices.
Another likely factor in the tamer-than-expected numbers was the report’s timing: The BLS asked businesses to provide pricing data as of Tuesday of the week containing the 13th. In this case, that would be March 10, which was just two weeks after the US-Israeli strikes in Iran began.
When excluding the volatile categories of food and energy, core PPI rose just 0.1% for the month, holding the annual rate steady at 3.8%.
The weekslong war in the Middle East has amplified the significance of inflation gauges like PPI, which could indicate how deeply spiking energy costs are rippling through the economy.
The PPI report comes just days after the Consumer Price Index showed Americans are already paying significantly more for a range of goods. The latest CPI report, which captures prices throughout the month and not for any specific data, showed prices rose 0.9% on a monthly basis and 3.3% annually.
PPI serves as a potential bellwether for what consumers could experience in the months to come. Some of the PPI data also feeds into the Personal Consumption Expenditures price index, which is what the Federal Reserve uses for its 2% target rate.
PPI categories that feed into the Fed’s preferred gauge showed firmer increases in March, RSM US economist Tuan Nguyen said, noting a 4.1% increase in airfare prices.
“That suggests PCE inflation – particularly the core measure – could accelerate more than the PPI data alone would indicate,” he wrote in note to investors Tuesday.
Nguyen, in an email to CNN, said his firm now expects PCE inflation to rise 0.7% on a monthly basis, bringing the annual rate to 3.5% (versus a 0.4% and 2.8% increase reported for February). Core PCE could rise 0.4% from February, which would keep the annual rate steady at 3%, he wrote.
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