Producer Inflation Hits Highest Level In A Year, Heightens Pressure On Consumer Prices

BY Benzinga | ECONOMIC | 05/14/24 08:43 AM EDT

Inflation affecting American producers showed a broader uptick in April, with the headline month-over-month figure far exceeding estimates Tuesday, one day before the critical consumer inflation report is released.

The Producer Price Index (PPI) shows an increase of 0.5% in April compared to March, reaching its highest level in a year.

April PPI Report: Key Highlights

  • The headline PPI surged by 2.2% in April 2024 on a year-over-year basis, surpassing the previous downwardly revised annual rate of 1.8% and matching expectations of 2.2%.
  • The month-on-month increase in the headline PPI was 0.5% in April, marking an acceleration from the downwardly revised 0.1% drop and topping estimates of 0.3%.
  • The PPI for goods witnessed a 0.4% monthly increase, affected by a 2% rise in the energy item.
  • The PPI for services saw a 0.6% monthly surge, with the trade item rising by 0.8%.
  • The core PPI, which excludes food and energy, held steady at 2.4% annually, as expected.
  • On a monthly basis, the core PPI jumped 0.5%, accelerating from the previous downwardly revised 0.1% drop and topping estimates of 0.2%.
<figure class="wp-block-table is-style-stripes">
PPI MeasureMar. 2024Apr. 2024Exp.
Headline (Y/Y)1.8%2.2%2.2%
Headline (M/M)-0.1%0.5%0.3%
Core (Y/Y)2.4%2.4%2.4%
Core (M/M)-0.1%0.5%0.2%

Market Reactions

Prior to the PPI release, traders had priced in nearly 50 basis points of Fed rate cuts by year end.

Treasury yields rose across the board, with the rate-sensitive two-year yield up 4 basis points to 4.88% as of 8:33 a.m. in New York.

The U.S. dollar index (DXY), as tracked by the Invesco DB USD Index Bullish Fund ETF , strengthened 0.2%.

Futures on major U.S. stock indices trended lower on Tuesday premarket trading. On Monday, the SPDR S&P 500 ETF Trust (SPY) closed flat.

Gold, as tracked by the SPDR Gold Trust , rose 0.5% to $2,343 per ounce.

Read now: As ‘Roaring Kitty’ Returns, Here Are 3 ETFs To Leverage The 2024 Meme Stock Wave

Photo via Shutterstock.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.