US producer prices fall unexpectedly in March

Producer prices in the US fell unexpectedly amid declines in energy and services prices.

According to the US Department of Labor, in seasonally adjusted terms so-called final demand prices were down by 0.5% month-on-month in March.

Economists had forecast no change in prices in comparison to February.

Final demand goods prices declined by 1.0%, dragged lower by a 6.4% drop in energy costs.

Food inflation came in at 0.6% over the month, albeit after three consecutive monthly drops.

Final demand services prices also came down, by 0.9% on the month, with those for trade - which includes retailers' margins, falling by 0.9% and those for transportation and warehousing by 1.3%.

In year-on-year terms, the rate of increase in total final demand prices dropped from 4.9% to 2.7%.

Kieran Clancy at Pantheon Macroeconomics highlighted the drop in the trade services component, estimating that margin inflation - excluding fuels - registered its first outright fall in quarterly annualised terms since May 2020.

The data pointed to an annual rate of decline in margins of 10% by the end of 2023, which would subtract 2-1/4 percentage points from core producer price inflation which in March ran at 3.4%, versus 6.9% half a year before.

He also believed that the PPI core services inflation excluding rents was "clearly" slowing and that was before the anticipated downshift in wage growth over the next few months.

"The key story here is that if core PPI inflation continues to fall rapidly, core PCE inflation will follow."