Key Takeaways From The Wholesale Inflation Report

Author: Bryan Silo

The Bureau of Labor Statistics reported that the Producer Price Index for final demand rose 0.8% in April, after rising 0.5% in March and 0.4% in February. On a year-over-year basis, producer prices have increased 4.2%.

Inflation at the wholesale level accelerated in April, as the Producer Price Index (PPI) for final demand rose 0.8%, the U.S. Bureau of Labor Statistics reported today. This marks the fourth consecutive monthly increase and is slightly higher than economists’ expectations of a 0.7% increase.

The PPI measures the average change over time in prices received by domestic producers for their output. The index can be used to track inflation at various stages of production and to predict consumer price inflationary pressures before they reach Main Street.

Food Prices Lead The Way Higher

One of the main drivers of inflation at the wholesale level is the cost of food, which rose 1.1% in April after increasing 1.0% in March and 0.5% in February. On a year-over-year basis, food prices have increased 5.2%. Prices for meats, poultry, fish, and eggs led the way higher, rising 2.3% on a monthly basis and 10.0% on a yearly basis.

Energy Prices Also Accelerate

In addition to higher food prices, inflation was also driven by higher energy prices, which rose 2.9% in April after declining in each of the previous three months. Gasoline prices jumped 3.6%, while prices for residential natural gas declined 1%. Despite the monthly increase, energy prices are still down 4.4% from a year ago as energy markets continue to recover from the news-driven sell offs last year due to the pandemic and economic shutdowns around the world.. 

While producer prices did accelerate in April, it’s important to keep this report in context with other data points released this week—namely, retail sales unexpectedly declined 0..3% in April after rising 6..3% in March and 9..8% in February as most Americans continued to receive stimulus checks from the federal government.. When combined with today’s PPI report, it’s evident that there continues to be significant disparities between different sectors of the economy as we move further away from last year’s lockdowns.. Nevertheless, with more Americans getting vaccinated every day and additional stimulus likely on the way, it’s reasonable to expect inflationary pressures will continue to build in coming months..