A key measure of inflation surged well beyond expectations in April, showing inflation is continuing to steamroll ahead.
The Producer Price Index (PPI) for final demand, which tracks the prices businesses in the U.S. receive for their goods and services, increased by 2.2 percent in April, according to the Department of Labor’s report on Thursday. This marks a 2.2 percent rise compared to a year ago, representing the largest annual increase in a year.
Economists had predicted a 0.3 percent gain in April compared to March and a 2.2 percent gain year-over-year.
The impact of the higher-than-expected April figures was somewhat mitigated by a revision in the prior month’s estimate, which was adjusted downward from a 0.2 percent gain to a 0.1 percent decrease.
The core Producer Price Index, which excludes volatile food and energy prices, surged by 0.5 percent in April, following a 0.1 percent increase in March. Economists had forecast a 0.2 percent gain. On an annual basis, core producer prices have risen by 2.4 percent.
Another measure, which excludes wholesale and retail margins known as trade services prices, rose by 0.4 percent in April. Year-over-year, this “core core” measure is up by 3.1 percent, marking the largest gain since a year ago.
The “producer price” aspect of the measure reflects that the price changes are gauged from the seller’s perspective rather than the buyer’s, excluding sales or excise taxes, government subsidies, and consumer-paid shipping costs. Import prices are also excluded since they are received by foreign producers, not U.S. producers.
The “final demand” part of the measure’s name indicates that it measures the prices of sales to end-users, excluding sales of components or materials directly used in creating goods and services sold to consumers. These are products sold to government buyers, households, businesses purchasing capital goods, and foreign buyers.
The index for final demand services recorded a 0.6 percent increase in April, the largest rise since a 0.8 percent jump in July 2023. Prices for final demand goods rose by 0.4 percent in April, rebounding from a 0.2 percent decline in March.
The unexpectedly high inflation figure is likely to delay any potential rate cuts from the Federal Reserve, which has indicated that it needs to see sustained evidence of falling inflation before considering reducing its federal funds benchmark interest rate.
{Matzav.com}