PPI Inflation in finished goods at double digit levels.

PRODUCER PRICES

Overall finished goods PPI prices rose a larger than expected 0.7% in March, driven by a 2.4% jump in PPI food prices (which matched January 1984 as the largest monthly gain since August 1980). PPI energy prices rose 0.7% on a 2.1% increase in gasoline. Over the last 12 months, overall PPI prices have risen 6.0%.

Core finished goods PPI prices rose 0.1% in March, in line with consensus expectations. Core PPI prices were boosted by a 4.9% increase in jewelry, although a decline in vehicle prices subtracted 0.1% point from the increase in the core PPI in the month.

BOTTOM LINE: Although core finished goods prices remain relatively well behaved, the rest of the report points to commodity-based inflation pressures. Both food and energy prices have risen at the finished goods level at a double-digit annualized pace during the first quarter and crude and intermediate goods prices are accelerating. Manufacturing is enjoying a V-shaped recovery (both in the U.S. and abroad) and the Fed will likely view higher commodity prices as a sign of recovery rather than as a sign of inflation. Our view is that the rise in commodity prices is in part a monetary phenomenon in response to easy money in the U.S., Europe and Asia and a sign of potential inflation pressures over the next year.


Source RDQ

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