Producer Prices Remain High but Show Signs of Slowing

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Customers browse racks of clothing as they shop inside a discount department retail store in Las Vegas.

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Patrick T. Fallon/ AFP via Getty Images

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Wholesale prices continued to hover near historical highs, but a deceleration in the pace of cost increases has fueled hopes that inflation may soon reach its peak.

The producer price index, or PPI, rose 11% year over year in April, above economists’ forecasts for a 10.7% increase, but below March’s 11.5% reading, according to the Labor Department.

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On a monthly basis, the PPI increased by 0.5%, in line with expectations. This is a significant deceleration from last month, when the index jumped 1.6%.

Prices for final demand goods excluding food, energy, and trade services rose by 0.6% in April after ticking up 0.9% in March, bringing the year-over-year increase up to 6.9%, down from 7.1% the previous month.

“Bottom line, we’ve likely also seen the peak in the rate of change in wholesale prices but price pressures are still pretty intense,” wrote Peter Boockvar, chief investment officer of Bleakley Advisory Group.

The PPI is widely considered as the business version of the consumer price index, or CPI. The index measures the change in prices for goods as they leave the factory.

The PPI deceleration further substantiates some economists’ hopes that inflation may have peaked, especially when coupled with April’s CPI figures. Overall consumer prices rose 0.3% last month, down from March’s 1.2% increase. Prices rose at an 8.3% annual pace last month, down from 8.5% in March.

“Coupled with yesterday’s modest reprieve in consumer price inflation, the latest PPI data offer tentative signs that price pressures perhaps peaked early in Q2,” wrote Oxford Economics economist Mahir Rasheed on Thursday. “Still, with demand remaining fairly buoyant and the supply side of the economy facing persistent supply-side headwinds, it may be too early to celebrate April’s moderation in the PPI.”

The fact that inflation may be cooling off won’t likely affect the Federal Reserve’s intent to keep raising interest rates throughout the course of the year, said Bill Adams, chief economist for Comerica Bank. The Fed will want to see “clearer evidence” that inflation is cooling and that higher rates are slowing demand before thinking of ending the current hike cycle, he added.

Write to Sabrina Escobar at [email protected]


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