US inflation at the wholesale level continued its downward slide in March with annualized price increases sinking dramatically to 2.7% from an upwardly revised 4.9%, according to the Producer Price Index released Thursday by the Bureau of Labor Statistics.
It’s the lowest annual level for the key inflation gauge since January 2021.
On a monthly basis, producer prices slumped by 0.5%, driven by falling goods prices, specifically lower energy prices. Prices for fresh and dry vegetables also fell, while the price indexes for categories such as light motor trucks, chicken eggs and meats moved higher.
Economists were expecting annual inflation, as measured by the PPI, to land at 3% for the 12 months ended in March and for no change from the month before.
“It’s good news that it looks like inflation is coming off the boil here,” Chris Rupkey, chief economist at FwdBonds, told CNN. “There is a pronounced slowing in producer goods, and if I had to bet, I would say that this is going to lead to lower prices for the goods sitting on the store shelves in the coming months.”
Core PPI, which excludes the more volatile components of food and energy, declined 0.1% for the month and, for the 12 months ended in March was up 3.4%, down from the upwardly revised level of 4.8%.
PPI is one of several closely watched inflation gauges. Because the producer-centric index captures price shifts upstream of the consumer, it’s sometimes looked to as a potential leading indicator of how prices may eventually land at the store level.
Since notching a 11.2% gain in June 2022, the PPI has seen a stark cooldown in the months since, as supply chains have got back into sync since being discombobulated by the pandemic and the sharp economic recovery that followed.
Consumer prices have come down as well, but at a more moderate pace.
The March Consumer Price Index, released Wednesday, was 5%, the lowest annualized rate since May of 2021, according to the BLS.
Much like CPI, the annual PPI also appears to have benefited from base effects, when year-over-year comparisons are volatile. In March 2022, a time when Russia had just invaded Ukraine and food and energy prices skyocketed, the PPI shot up to a record 11.7%.
Month-to-month comparisons can be volatile, but the the PPI’s 0.5% drop seen in March did follow an unchanged reading in February.
This story is developing and will be updated.
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