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

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%.

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 UUP, 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 GLD, rose 0.5% to $2,343 per ounce.

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