PrintProducer Inflation Fell Short In March ? Is The Hormuz Shock Still Loading?
BY Benzinga | ECONOMIC | 08:41 AM EDTWall Street braced for the Hormuz shock to hit wholesale prices in March. The data said not yet.
The Producer Price Index for final demand rose 0.5% month-over-month in March, matching February’s pace of 0.5% but landing below the 1.1% consensus estimate, according to the Bureau of Labor Statistics.
On an annual basis, PPI came in at 4% ? below expectations of 4.6% ? but up from 3.4% in February and hitting the highest value since February 2023.
Core PPI told the same story. PPI excluding food and energy rose just 0.1% on the month, well below the 0.5% forecast, and decelerated to 3.8% year-over-year against a 4.1% consensus.
<figure class="wp-block-table is-style-stripes">| Metric | Actual | Consensus | Previous |
|---|---|---|---|
| PPI MoM | 0.5% | 1.1% | 0.5% |
| PPI YoY | 4.0% | 4.6% | 3.4% |
| Core PPI MoM | 0.1% | 0.5% | 0.3% (revised from 0.5%) |
| Core PPI YoY | 3.8% | 4.1% | 3.8% (revised from 3.9%) |
Energy Did The Lifting, Services Did The Dampening
The headline softness masked a stark split inside the report. Final demand goods surged 1.6% on the month ? the largest rise since August 2023 ? driven almost entirely by an 8.5% jump in energy prices.
That energy spike is the direct fingerprint of the Hormuz closure: gasoline prices alone rose 15.7%, accounting for nearly half of the entire goods advance.
Diesel fuel, jet fuel and home heating oil all climbed alongside. Foods declined 0.3%, providing a partial offset within goods.
Final demand services, which carry nearly 70% of the index’s weight, were unchanged ? the first flat reading after a 0.3% gain in February.
The detail tells a mixed story. Transportation and warehousing services rose 1.3%, with airline passenger services jumping 2.8% and truck freight also higher.
But trade services ? margins received by wholesalers and retailers ? fell 0.3%, dragged down by a 6.0% collapse in food and alcohol wholesaling margins.
Services less trade, transportation and warehousing, which covers the bulk of the consumer services economy, edged up just 0.1%.
“March's inflation could have been much worse. The Iran war triggered a spike in energy costs, but it may prove more of a one-off blip than the start of a 1970s-style inflationary spiral,” said David Russell, global head of market strategy at TradeStation.
“This is good news for the incoming Fed chair. The doves could make a comeback,” he added.
<figure class="wp-block-table is-style-stripes">| Category | MoM % |
|---|---|
| Final Demand (Total) | +0.5% |
| Final Demand Goods | +1.6% |
| ? Energy | +8.5% |
| ? Foods | -0.3% |
| ? Goods less foods & energy | +0.2% |
| Final Demand Services | 0.0% |
| ? Transportation & warehousing | +1.3% |
| ? Trade services | -0.3% |
| ? Services less trade, T&W | +0.1% |
Market Reactions
The softer-than-expected PPI print reinforced what the peace talk headlines had already started: a broad unwind of war-premium trades.
Contracts on he S&P 500 ? as tracked by the SPDR S&P 500 ETF Trust
The Dow Jones Industrial Average gained 0.17%.
WTI crude fell 3.1% to $95.97 a barrel, Brent dropped 1.5% to $97.9.
Financial stocks moved after quarterly results. JPMorgan Chase & Co.
Citigroup Inc.
