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Investing.com - Headline U.S. producer prices for final demand increased on an annualized basis in March due largely to an Iran war-linked spike in energy costs, although the overall growth was not as sharp as expected.
The weaker-than-estimated Producer Price Index report on Tuesday pointed to possibly significant gains in inflation measures closely followed by the Federal Reserve in March. Expectations that the Fed will slash interest rates this year have eased as a steep climb in oil prices exacerbated concerns over a potential jump in inflationary pressures.
"After a strong couple of months, the downside surprise in core producer prices in March offers some encouragement for the Fed that pipeline inflation pressures are not spiralling out of control," said Stephen Brown, Chief North America Economist at Capital Economics, in a note.
Crude prices were last hovering below the $100 a barrel level, although they are still well above pre-war levels. Analysts have suggested that it make take some time for the impact of the surge to be felt across the wider U.S. economy.
In the twelve months to March, PPI rose by 4.0% from 3.4% in February, Labor Department data showed. Economists had seen the figure at 4.6%. The advance was attributed to a 1.6% rise in the index for final demand goods, the largest such gain since August 2023.
Prices for final demand energy spiked by 8.5%. Gasoline prices, in particular, jumped by 15.7%, while the index for diesel fuel, jet fuel, home heating oil, meats, and primary basic organic chemicals also increased. However, prices for services remained steady.
Month-on-month, the figure stood at 0.5%, matching February’s rate and slower than projections for an uptick of 1.1%.
