Producer prices post biggest annual increase on record

Market will pressure the Fed to address inflation surge: Market strategist

Former Nuveen chief equity strategist Bob Doll on his outlook for inflation.

Producer prices rose in April at the fastest annual pace on record as the reopening of the U.S. economy from COVID-19 lockdowns continued to gain momentum.

The producer price index for final demand last month rose at a 6.2% annual pace, quickening from March’s 4.2% increase, the Labor Department said Thursday. The April reading made for the biggest annual jump since recordkeeping began in November 2010. On a monthly basis, prices jumped 0.6%, slowing from last month's 1.0% increase.

The annual data has a "base effects" skew due to the price decline that occurred at the onset of the pandemic.

USED CAR AND TRUCK PRICES SOAR BY MOST ON RECORD

Analysts surveyed by Refinitiv had expected prices to increase 5.9% year over year and 0.3% from March. 

Half of the increase in April was due to the 0.5% rise in the index for final demand services less trade, transportation, and warehousing. Meanwhile, prices for final demand goods climbed 0.6%, slowing from the 1.7% advance last month. 

Prices for steel mill products surged 18.4% while beef and veal, pork, residential natural gas, plastic resins and materials and dairy products also saw increases. Gasoline prices slid 3.4% as prices for chicken eggs and for carbon steel scrap also declined.

Core prices, which exclude the volatility from food and energy, rose 0.7% month over month and 4.1% year over year. Economists had expected increases of 0.4% and 3.7%, respectively. 

The April PPI report comes a day after the Labor Department said the consumer price index last month rose 4.2%. Prices rose 0.8% month over month, quickening from a 0.6% increase the prior month. 

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The rapid increase in prices has caused some investors to question whether the Federal Reserve will be forced to abandon the emergency measures that were enacted to support the U.S. economy. The central bank last year cut interest rates to near zero and announced unlimited asset purchases after the economy was hurled into recession due to lockdowns aimed at slowing the spread of COVID-19. 

The Fed has said it will let inflation run above its 2% target "for some time" with the hopes of spurring inflation that has been elusive since the 2008 financial crisis.  

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