Updated: 15-Apr-08 09:28 ET

March PPI

Updated: 15-Apr-08 09:28 ET

Highlights

• March PPI 1.1% (6.9% yoy), core 0.2% (2.7% yoy).

Key Factors

• Core prices rose a less dramatic 0.2% after the strong 0.5% and 0.4% gains over the last two months.
• The surprises were in stronger than expected food (1.2%) and energy (2.9%) prices.
• Annual growth for the core of 2.7% is just below the decade high 2.8% in July 2005.  Total PPI at 6.9% yoy -- below the quarter century high of 7.4% in January.
• However, there hasn't been any carry over to core consumer prices where core commodity prices are flat from a year ago.
• Core intermediate goods prices reached 5.5% yoy, core crude goods at 17% yoy.
• The global demand forces driving non core food and energy prices will continue and are little effected by Fed policy.

Big Picture

• Annual growth rose to a quarter century high of 7.4% in January given the surge in energy prices but has fallen off to 6.9% yoy in March.  Annual growth was just 2.3% in August before the acceleration in energy prices.   Higher food prices also weigh in as the core component has turned a stronger as well and stands 2.7% above the year ago level.  More important, to date core producer pipeline pressures are not providing any lift to core consumer prices.  CPI core commodity prices are flat from a year ago despite the rise in core PPI prices.  That is, core wholesale/commodity pricing pressures aren't yet pressuring retail prices as non-core energy and food prices are.  Services, not included in PPI, are the key pressures in consumer prices.