CNN
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US wholesale prices fell last month, new data showed on Friday. This indicates that inflationary pressures are not necessarily built before reaching consumers.
A better-than-expected read of producers’ price index showed that prices paid to producers fell 0.4% from the previous month, falling sharply from 3.2% to 2.7% a year – providing a snapshot before President Donald Trump’s aggressive trade policy begins completely.
However, the sharp decline in the overall index was partly attributable to wider concerns that the global economy would slow down due to dramatic changes in US trading policies.
Energy prices lowered the overall PPI shown by data on Thursday, as they did with CPI. The energy in the final demand index sunk 4% of the month, the Bureau of Labor Statistics reported Friday.
Energy prices usually rise during this period. But they moved lower last month due to imbalance in supply and demand and concerns about a recession that emphasizes oil prices.
Still, Friday’s report provided some welcome signs in terms of inflation. First, wholesale food prices fell 2.1%. Furthermore, underlying inflation continued to slow. Core PPIs, excluding food and energy, excluding categories that tend to be highly volatile, fell 0.1% from February (when it rose 0.1%), bringing an annual increase of 3.3%, the lowest rate since September.
Economists expected monthly prices to rise by 0.2%, accelerating to 3.3% per year.
PPI, which measures the average change in prices received by producers of goods or services, serves as a potential precursor to retail-level inflation over the coming months. The indicator is being scrutinized to gather insights into the early impact of the proposed tariffs by Trump.
March has had two months of tariffs on Chinese goods being valid (up from 10% of all imports to 20% in early March). The global 25% tariff on steel and aluminum imports came into effect on March 12th.
In April, Trump raised ante in his tariff regime. This includes imposing a 10% tariff on imports and a 145% obligation on Chinese imports.
Economists warn that a rapid escalation of effective tariff rates in America will not only increase prices for businesses and consumers, but will also disrupt the global economy and possibly cause a recession.
The PPI on Friday gave some hints on how tariff-related price pressures are permeating.
Prices at wholesale steel factories rose 7.1% in March, marking the biggest monthly jump in April 2021 since Fritz amid a sharp pandemic recovery.
On Thursday, data from the latest consumer price index showed that overall inflation has cooled down for the goods and services Americans generally purchase. However, a rapid escalation of the tariff and trade war with China is expected to raise consumer prices.
This story has been developed and updated.
