Wholesale Inflation Also Eases, Key Components Cool

The Producer Price Index (PPI), a key measure of wholesale inflation, declined 0.4% from February to March, with the annual rate dropping from 3.2% to 2.7%. This was much cooler than the 3.3% reading that had been forecasted. The decline was largely due to a plunge in gasoline prices, like in the CPI report.

Excluding the more volatile food and energy sectors, the Core PPI still slipped 0.1% month over month, and the year-over-year rate fell from 3.5% to 3.3% – also below expectations.

What’s the bottom line? This PPI data is crucial, as it impacts the Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge. An analysis shows that many shared components, such as airline passenger services, portfolio management, and healthcare, were much cooler in March compared to February’s PPI report.

This suggests the upcoming PCE report (set for April 30) could also indicate easing inflation. However, with the PCE report covering March data, the market reaction may be muted if ongoing trade and tariff issues remain the key focus later this month.