April 2018 Producer Price Index

Price increases slowed in April 2018 for producers and wholesalers according to the Bureau of Labor Statistics’ Producer Price Index.  This price proxy increased 0.1 percent after rising 0.3 percent in March.  The headline’s year-over-year tally also slowed, falling to 2.6 percent from 3.0 percent to close the first quarter. Stripping out food and energy, the core-PPI also decelerated as the monthly number fell to 0.2 percent from 0.3 percent, and the year-over-year figure declined to 2.3 percent from 2.7 percent.  Additionally, prices will likely continue moving upward according to earlier stage movements. 

Increases were evident in both earlier stages of goods.  Processed goods for intermediate demand rose 0.5 percent in April after falling 0.3 percent in March; energy led the uptick, rising 1.3 percent, but this did not make up for the previous month’s decline of 3.1 percent.  Likewise, unprocessed goods for intermediate demand ticked up 0.9 percent after the prior print collapsed 4.8 percent.  Year-over-year, both categories are up.

Services for intermediate demand rose once again.  This component of the report added to its long string of increases, matching March’s 0.3 percent rise but slowing to 3.1 percent from 3.2 percent on a year-over-year basis.  Greater margins received for trade services led this segment higher.

Inflation, while evident in our economy, is not yet reaching levels the Federal Reserve considers worrisome.  For instance, producer prices have been higher earlier in this business cycle.  For now, it is hard to imagine America’s central bank taking drastic actions based on the current inflation environment.