US producer prices post biggest gain in four years in April

US 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 percent last month after an upwardly revised 0.7 percent 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 percent after a previously reported 0.5 percent increase in March.

Producer prices have risen strongly this year, partly driven by higher energy costs, as the US-Israeli war with Iran disrupted shipping in the Strait of Hormuz. The conflict is straining global supply chains, causing shortages of a wide range of goods, including fertilizers, aluminum and consumer products. 

In the 12 months through April, the PPI jumped 6.0 percent. That was the largest increase since December 2022 and followed a 4.0 percent 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.

The rise in inflation is becoming pervasive, posing a challenge for the Federal Reserve. The BLS reported on Tuesday that the Consumer Price Index rose further in April, with the annual inflation rate posting its largest gain in three years.

The US central bank tracks the Personal Consumption Expenditures price indexes for its 2 percent inflation target.

Prior to the PPI report, economists estimated PCE inflation, excluding the volatile food and energy components, could rise by as much as 0.4 percent in April after gaining 0.3 percent in March. Estimates for the year-on-year increase in the so-called core PCE inflation were as high as 3.4 percent. It increased 3.2 percent in March. 

The Fed last month left its benchmark overnight interest rate in the 3.50 percent-3.75 percent range. 

Reuters

 

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