Wholesale prices surge on higher cost of gas, PPI shows, but inflation mostly tame - MarketWatch

Bloomberg News/Landov

The cost of most wholesale goods and services in the U.S. aren’t rising very much aside from gas and other forms of energy.

The numbers: The wholesale cost of U.S. goods and services surged in March, but almost all of the increase reflected the higher cost of gas. Evidence of rising inflation was otherwise largely absent.

The producer price index climbed 0.6% last month. Economists polled by MarketWatch had predicted a 0.3% increase.

Yet another measure of wholesale costs that strips out volatile food and energy prices, known as core PPI, was flat on the month.

The rate of wholesale inflation in the past 12 months rose to 2.2% in March from 1.9%, but it’s still much lower compared to last summer, when it touched a seven-year high of 3.4%.

What happened: The wholesale cost of goods jumped 1% in March, with 60% of the increase reflecting higher gasoline prices, the government said.

Food prices rose 0.3%, as did the cost of services.

Still, there was little sign of broad inflationary pressures building.

The wholesale cost of partly finished goods, for example, has risen just 1.3% in the past year. And the cost of raw materials has actually fallen 3.5% in the last 12 months.

The 12-month rate of inflation as measured by core PPI, meanwhile, slipped to 2% from 2.3%. That’s the lowest level in almost a year and a half.

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Big picture: Inflation has waned after a big runup in the first half of last year despite rising wages and higher prices for certain goods due to U.S. tariffs. The low level of inflation has prompted the Federal Reserve to cancel prior plans to raise interest rates this year.

The latest reports on consumer and wholesale inflation are unlikely to worry Fed officials given that most of the increase in prices is tied to gas. Fuel costs often swing sharply up and down over the course of a year and don’t give a good sense of underlying inflation.

Read: Goldilocks economy? No. But steady job gains, low inflation to keep recession at bay

Market reaction: The Dow Jones Industrial Average DJIA, +0.06% and S&P 500 SPX, +0.06% were set to open higher in Thursday trades.

The 10-year Treasury yield TMUBMUSD10Y, +1.01% fell slight to 2.47%. Yields are much lower compared to late last year, when they hit a seven-year high of 3.23%.

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https://www.marketwatch.com/story/us-wholesale-prices-surge-on-higher-cost-of-gas-ppi-shows-but-inflation-mostly-tame-2019-04-11

2019-04-11 13:00:00Z
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