Producer prices in the U.S. saw a higher-than-anticipated increase in April, according to a report released by the Labor Department on Tuesday.
The Labor Department's data revealed that its producer price index (PPI) for final demand rose by 0.5% in April, following a revised 0.1% decline in March. Economists had predicted a modest 0.3% ascent, compared to the initially reported 0.2% increase for the previous month.
The report also highlighted that the annual growth rate of producer prices accelerated to 2.2% in April from a downwardly revised 1.8% in March. This rise aligned with predictions, which anticipated an increment to 2.2% from the previously reported 2.1%.
Quincy Krosby, Chief Global Strategist for LPL Financial, commented, "This report underscores Fed concerns that the path of disinflation has stalled, necessitating a more prolonged higher rate policy to tackle seemingly entrenched inflation." She further noted, "The chances for interest rate cuts have diminished as the Fed's timeline for initiating a rate easing cycle is hindered by persistently higher prices."
The substantial contributor to the monthly growth was service prices, which surged by 0.6% in April after a slight 0.1% decline in March, marking the most significant increase since July 2023. Within this category, transportation and warehousing services experienced a 0.6% decrease, while trade services and other services rose by 0.8% and 0.6%, respectively.
Additionally, the report showed a notable rebound in energy prices, which spiked by 2.0% in April after plummeting by 1.3% in March. Conversely, food prices decreased by 0.7% in April, following a 0.4% rise in the previous month.
Excluding the volatile sectors of foods, energy, and trade services, core producer prices increased by 0.4% in April after a 0.2% uptick in March. The annual growth rate for core producer prices accelerated to 3.1% in April from 2.8% in March, representing the fastest growth since a 3.4% surge in April 2023.
Looking ahead, the Labor Department is set to release a separate report on consumer price inflation for April on Wednesday. Consumer prices are projected to increase by 0.4% in April, maintaining the same growth rate as in March. Core consumer prices, which exclude food and energy, are expected to register a 0.3% increase in April, slightly lower than the 0.4% rise seen in March. The annual growth rate for consumer prices is anticipated to dip to 3.4% in April from 3.5% in March, while the annual rate for core consumer price growth is forecasted to slow to 3.6% from 3.8%.