Hot April producer price number adds to inflation worries

NEW YORK, May 13 (Reuters) - ?U.S. producer prices increased more than expected in April, posting their biggest gain since early 2022, the latest indication that inflation was accelerating amid the war with Iran.

The Producer Price Index for final demand surged 1.4% last month after an upwardly revised 0.7% advance in March, the Labor Department's Bureau of Labor Statistics said on Wednesday. Last month's increase was the largest since March 2022, and the rise was across goods and services.

Economists polled by Reuters had forecast the PPI gaining 0.5% after a previously reported 0.5% increase in March.

In the 12 months through April, the PPI jumped 6.0%. That was the largest increase since December 2022 and followed a 4.0% rise in March. Part of the surge in the year-on-year PPI rate reflected last year's low readings dropping out of the calculation.

MARKET REACTION:?

STOCKS: U.S. stock indexes were mixed following the report, with the Dow Jones Industrial Average down 0.4%, the S&P 500 off 0.1% and the Nasdaq composite up 0.1%.

BONDS: Treasury yields were flat, with the 2-year yield at 3.99% and the 10-year yield at 4.47%.?

FOREX: The dollar index was up 0.2% at 98.50.

COMMENTS:?

PAUL NOLTE, SENIOR WEALTH ADVISOR AND MARKET STRATEGIST, MURPHY & SYLVEST WEALTH MANAGEMENT, ELMHURST, ILLINOIS:

"If PPI continues to run hotter than CPI data, you could see some margin compression in companies that are not able to pass those costs along. We'll have to see. It's going to mean that with PPI continuing to run high, it means that CPI will continue to be also high because those costs will eventually flow through. And then it will put pressure on the Fed not to cut rates."

PETER CARDILLO, CHIEF MARKET ECONOMIST AT SPARTAN CAPITAL SECURITIES, NEW YORK:

"Okay, these numbers are much more than market expectations and certainly much more than we were looking for. So basically, it confirms that inflation is, you know, has creeped into the pipeline and most of that is due to the energy costs, but there are other factors involved as well. So you have year on year top line inflation at 6%.

"These numbers are ugly, and certainly? it puts the Federal Reserve on hold for a sustained period of time. You can see the markets are reacting. S&P is now a little bit lower, and NASDAQ is a little bit higher, but we're seeing the dollar climb. We're seeing yields climbing looks like 4.5% is not that very far away. And this is, of course, very challenging data in terms of inflation. And it just simply means that Mr. Warsh Is not likely to move on cutting rates anytime soon, and perhaps for the remainder of the year."

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:

"That escalated quickly. Excluding food and energy, the 3.8% year-over-year number is less eye-watering.

"With a 15.6% increase in the index for gasoline, it's not too surprising that transportation and distribution costs have shot higher. For now, the energy shock is more a threat to corporate margins than to consumer prices, but the longer prices stay elevated, the more will bleed through to the consumer."

MARK HACKETT, CHIEF MARKET STRATEGIST, NATIONWIDE INVESTMENT MANAGEMENT GROUP, PHILADELPHIA:?

"The headline number is not too much of a surprise because of the difficulty in predicting due to energy, but the real eye opener is core (+1.0% M/M, 5.2% Y/Y). This reflects the contagion from energy and the pricing power in the system. This reinforces what we saw during earnings season. Perhaps more interesting, though, is the markets' lack of reaction to the PPI or CPI or Iran news, which reflects the power of the market and the focus on earnings."

THOMAS MARTIN, SENIOR PORTFOLIO MANAGER, GLOBALT, ATLANTA:

"The takeaway is that we're increasingly worried about inflation and it's obviously because of what's happening in the Strait (of Hormuz), the price of oil and how that flows through to ... services as well as manufacturing and other products.

"And it's just getting started. We're starting to see some hot numbers, it just corroborates that this is potentially, you know, an issue."

(Reporting by Lucia Mutikan, Utkarsh Hathi, Chuck Mikolajczark, Stephen Culp, Chibuike Oguh, Lewis Krauskopf; editing by Colin Barr)