US wholesale inflation slowed in April, but prices are still up 11% over the past year

The payment: The cost of wholesale goods and services rose 0.5% less in April than in the previous month, but strong inflationary pressures in the guts of the economy showed little abatement.

Economists polled by the Wall Street Journal had forecast a 0.5% rise.

In March, wholesale prices had surged 1.6%, mainly due to a rise in oil prices.

Wholesale price growth slowed from 11.5% to 11% last year. The government announced this on Thursday.

That’s the first drop since the pandemic began and reflects a fall in consumer inflation over the past month.

Trends in wholesale prices provide clues to the path of inflation – what consumers end up paying for what they buy. However, inflation is still at its highest level in 40 years and the wholesale report didn’t show much sign of price pressures easing significantly in the near future.

So-called core wholesale prices rose by 0.6%, which was roughly in line with the average increase over the last 12 months. Wall Street had expected a gain of 0.6%.

The Federal Reserve views the core rate as a clearer window into inflation trends as it screens out volatile food and energy prices. However, households still spend a large part of their budget on fuel and meals.

Big picture: High inflation has become a major concern for consumers, businesses and investors. It also causes a political crisis in Washington.

The Fed is rapidly raising rates to curb inflation, but higher rates are taking time to have an impact.

Furthermore, much of the inflation is linked to global supply shortages that the central bank cannot solve unless it tries to slow the economy – an approach that could plunge the US into recession.

Key data: The wholesale cost of goods rose 1.3% last month, driven by increases in cars, chickens, eggs, electricity and natural gas.

Gas prices fell last month after rising sharply in March following Russia’s invasion of Ukraine. The bad news: Prices are rising again.

The wholesale cost of groceries rose 1.5% in April. Grocery prices have risen at their fastest rate since 1981 and are unlikely to reverse anytime soon.

The cost of services was flat in April.

The cost of semi-finished goods and raw materials both jumped in April. These prices remain extremely high and offer little sign of an impending and rapid deceleration in inflation.

Commodity prices, for example. have increased by 48% over the past year.

The PPI report reflects what companies are paying for supplies such as grain, fuel, metals, lumber, packaging, etc. Steadily rising wholesale prices tend to be a harbinger of higher inflation.

Looking ahead: “Coupled with yesterday’s modest respite in consumer price inflation, the latest PPI data offer preliminary signs that price pressures may have peaked early in the year [second quarter]’ said US economist Mahir Rasheed of Oxford Economics.

“We need a lot more evidence before we can say that inflation has peaked,” said senior economist Jennifer Lee of BMO Capital Markets. “But at least it was a step.”

Market reaction: The Dow Jones Industrial Average DJIA,
and S&P 500 SPX,
should drop again in trading on Thursday. Stocks have fallen sharply over the past week. US wholesale inflation slowed in April, but prices are still up 11% over the past year

Brian Lowry

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