U.S. producer prices rise slightly below expectations

U.S. producer prices rose slightly below consensus expectations in April. On a sequential basis, producer prices grew 0.1 percent, as compared with consensus expectation of 0.2 percent, nudging the annual rate of growth down to 2.6 percent. On a core level, the PPI rose 0.2 percent, coming in line with projections and taking the annual pace of growth to 2.3 percent. In the meantime, producer prices, excluding food, energy & trade services rose modestly by 0.1 percent. Overall, the report released today indicates towards some weakness in pipeline price pressures in April.

Delving into details, goods prices remained flat sequentially, while services PPI rose modestly by 0.1 percent. The latter was underpinned by inflation in transportation & warehousing – a category that has been printing solid for three consecutive months, and stable inflation in trade services. In business surveys such as the ISM, firms have cited rising transportation costs in the midst of a shortage of truckers and introduction of new regulations. Moreover, companies expect a rise in the cost of some intermediate commodities on account of the tariffs on steep and aluminium. All of this implies that a further rise in pipeline prices pressures is expected, noted Barclays.

Meanwhile, food prices dropped sharply by 1.1 percent in the month, while energy prices rose modestly by 0.1 percent. There are upside risks to energy prices if the recent move upwards in global oil prices carry on.

Personal consumption PPI dropped 0.1 percent sequentially and 2.2 percent year-on-year. Stripping food & energy, personal consumption PPI fell 0.1 percent. Even if the sequential mapping between the PPI and CPI measures is not always accurate, these figures indicate towards a small downside risk to the CPI projection for April, stated Barclays.

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