The producer price index for final demand surged 1.4% last month, following a revised increase of 0.7% in March, the Bureau of Labor Statistics said on Wednesday. Last month’s rise was the strongest since March 2022 and covered all goods and services. Economists surveyed by Reuters had expected a 0.5% increase in the PPI, after a 0.5% increase previously reported for March.
Prices in the production sector have risen sharply this year, partly due to the increase in energy costs, as the war between the United States and Israel against Iran has disrupted maritime traffic in the Strait of Hormuz. This conflict is testing global supply chains, causing shortages of a wide range of products, including fertilizers, aluminum, and consumer goods.
Over the 12 months to April, the PPI jumped 6.0%. This is the biggest increase since December 2022, following a 4.3% increase in March. Part of the spike in the year-on-year PPI rate is explained by the drop in low figures from last year’s calculation.
The inflation increase is becoming widespread, posing a challenge to the Federal Reserve. The BLS reported on Tuesday that the consumer price index (CPI) had risen again in April, with the annual inflation rate experiencing its biggest jump in three years.
The Federal Reserve uses personal consumption expenditure price indices to achieve its 2% inflation target.
Before the release of the PPI report, economists estimated that the core PCE inflation, excluding volatile components such as food and energy, could increase by 0.4% in April after a 0.3% rise in March. Estimates for the year-on-year increase in underlying PCE inflation reached 3.4%. It had increased by 3.2% in March.
Last month, the Fed kept its benchmark interest rate unchanged at a range of 3.50% to 3.75%.
