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U.S. Producer Prices Rise at Record Rate of 4.2%

April 9, 2021

The Producer Price Index for final demand increased 1.0 percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.5 percent in February and 1.3 percent in January. On an unadjusted basis, the final demand index moved up 4.2 percent for the 12 months ended in March, the largest advance since rising 4.5 percent for the 12 months ended September 2011.

Wall Street was only expecting PPI to increase 0.5% in March and jump 3.8% year-on-year.

In March, almost 60 percent of the increase in the index for final demand can be traced to a 1.7-percent advance in prices for final demand goods. The index for final demand services moved up 0.7 percent.

Prices for final demand less foods, energy, and trade services rose 0.6 percent in March following an increase of 0.2 percent in February. For the 12 months ended in March, the index for final demand less foods, energy, and trade services moved up 3.1 percent, the largest advance since climbing 3.1 percent for the 12 months ended September 2018.

Final Demand

Final demand goods: Prices for final demand goods rose 1.7 percent in March, the largest increase since the index began in December 2009. Sixty percent of the broad-based advance in March is attributable to prices for final demand energy, which jumped 5.9 percent. The indexes for final demand goods less foods and energy and for final demand foods moved up 0.9 percent and 0.5 percent, respectively.

Product detail: Over one-fourth of the March increase in the index for final demand goods can be traced to an 8.8-percent jump in gasoline prices. The indexes for diesel fuel, residential electric power, industrial chemicals, steel mill products, and processed poultry also moved higher. In contrast, beef and veal prices fell 4.3 percent. The indexes for fresh and dry vegetables and for surgical and medical instruments also declined.

Final demand services: The index for final demand services rose 0.7 percent in March, the third consecutive advance. Nearly half of the broad-based increase in March is attributable to margins for final demand trade services, which moved up 1.0 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services advanced 0.4 percent and 1.5 percent, respectively.

Product detail: Over 40 percent of the March increase in prices for final demand services can be traced to margins for machinery and vehicle wholesaling, which jumped 6.7 percent. The indexes for apparel, jewelry, footwear, and accessories retailing; transportation of freight and mail; portfolio management; loan services (partial); and food retailing also moved higher. Conversely, margins for health, beauty, and optical goods retailing decreased 4.2 percent. The indexes for automobiles and automobile parts retailing and for traveler accommodation services also declined.

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