Prices Recede – The PPI and Other Economic Data For March
Following the major release of the Consumer Price Index for the month of March, investors were overall pleased with the steep decline to 5% inflation year-over-year. Now, the data from the producer side of the economy has provided corroborating evidence that inflation is seemingly subsiding. The Producer Price Index, a metric that tracks selling prices received by producers of goods and services, only declined by 2.7% relative to the previous year. This was 30 basis points lower than the forecast of 3%, depicting the largest drop in producer-side prices since April 2020. A lower PPI has the potential to foreshadow further cooling in consumer prices, so long as firms adjust their prices according to the drops in their resources.
For March, although CPI was cooler than expected, Core CPI seemed to be lingering at unfavorable levels. Excluding volatile food and energy prices, Core CPI had grown 5.6% year-over-year in the month of March, up from 5.5% in February. However, there was better news on the labor market front, where weekly jobless claims rose by 11,000, signaling a slightly weaker job market persisting past March. Nevertheless, several economists still do believe the gains made towards disinflation do not rule out the 10th-straight interest rate hike in the Fed’s next meeting. In the meantime, investors should gauge the overall sentiment from the next earnings cycle and more reports of the labor market poised to be released before the Fed’s meeting on May 3rd.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.