U.S. Producer Prices (PPI) beat estimates with huge March gains of 1.0% for the headline and 0.7% for the core, after respective February gains of 0.5% and 0.2%, and record respective January increases of 1.3% and 1.2%. The March gains rounded from respective increases of 0.984% and 0.660%. The y/y gain rose to a 10-year high of 4.2% from 2.8%, leaving the largest gain since September of 2011. The core y/y gain rose to a record-high 3.1% from 2.5%. The big upside surprise reflected a hefty 1.7% rise for goods prices, alongside a 0.7% service price gain. The massive PPI climb through Q1 sharply exceeds the uptrend in headline CPI and the lean trajectory in the core price data from that survey.
- PPI surged 1.0% after a 0.5% February gain, leaving the y/y metric surging to a 10-year high of 4.2% from a 2-year high of 2.8% in February, 1.7% in January and 0.8% in November and December.
- PPI core rose 0.7% after a 0.2% February gain, leaving the y/y metric rising to a record-high of 3.1% from a 2-year high of 2.5% in February, 2.0% in January and 1.2% in December.
- We saw March gains of 5.9% for energy prices and 0.5% for food prices.
- We saw a 1.0% March rise in trade services, after a 0.1 gain.
- We saw a 1.5% rise for transportation and warehousing services, after a 1.1% February rise.
- We saw a 0.4% rise for “other” service prices, after a flat February figure.
- We saw a 1.3% PPI surge on the old SOP basis, after gains of 1.5% in February, 1.1% in January and 0.8% in December.
- January PPI increases 1.3% for the headline and 1.2% for the core were the largest on record since the methodology changes in 2009.
The headline was lifted by a solid 1.7% goods price gain, thanks to a 5.9% rise for energy and a 0.5% rise for food. We saw a 0.7% service price gain, with a 1.0% rise for trade services, which reflects margins of wholesalers and retailers, a 1.5% rise for transportation and warehousing services, and a 0.4% rise for the remainder of services.
On a moving average basis, PPI headline and core gains are trending sharply higher after the pull-back in Q2 of 2020, in contrast to the more stable CPI trajectory. We have 6-month average price gains of 0.609% for the headline and 0.403% for the core that exceed respective 12-month average gains of 0.355% and 0.258%.
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In April, we expect the PPI gains of 0.2% for both the headline and core, which would leave the y/y headline metric popping to 5.7% from today’s 4.2%, alongside a bounce in the core price gain to 3.6% from today’s 3.1%. The y/y metrics should peak around 5.7% for the headline and 3.8% for the core in Q2.
We expect March CPI gains of 0.5% for the headline and 0.2% for the core, alongside respective March PCE chain price gains of 0.4% and 0.2%. Trade prices are poised for March gains of 0.9% for both imports and exports.