US wholesale inflation rises more than forecast
US producers prices rebounded more than expected in April after a downwardly revised fall the previous month, with the annual rate of inflation rising to its highest level in a year.
The Bureau of Labor Statistics said US producer price index (PPI) increased by 0.5% over the month of April, compared with a fall of 0.1% in March, which was revised from the 0.2% increase initially recorded.
This was ahead of the 0.3% increase expected by economists, with nearly three-quarters of April's gain coming from an increase in the index for final demand services, the Bureau said.
Excluding more volatile items like food and energy, PPI also rose 0.5% after a 0.1% decline previously, missing the 0.2% estimate.
The annual change in the PPI picked up to 2.2% from a downwardly revised 1.8% increase the month before – marking the strongest annual increase since April 2023 – though the core year-on-year rate held steady at 2.4%.
March's gain in total final demand prices was revised from a 0.2% gain month-on-month to a decline of 0.1%.
According to Matthew Martin at Oxford Economics, Tuesday's producer price data could hardly be expected to make the Fed more confident that inflation was headed lower after the "hot" start to the year. But there were caveats, he added.
The components of the PCE price deflator - the price gauge targeted by the Fed - that were extracted from the producer price data likely indicated a "softer" rise in that index in April.
Martin also noted the role played by crude prices in the jump in wholesale inflation, due to fears over the Middle East conflict in April, which had since unwound. And given the output increases from OPEC+ pencilled in for the back half of 2024, April's increase would not hold, he said.