‘If you are in the stagflation camp, these data aren’t confirming your thesis,’ one market expert said.
Wholesale inflation in April recorded the sharpest drop since the onset of the COVID-19 pandemic, signaling that U.S. tariffs have yet to affect consumers.
Last month, the producer price index (PPI)—a gauge of prices for goods and services paid by businesses early in the supply chain—fell by 0.5 percent, down from the upwardly adjusted zero percent recorded in March.
The consensus forecast suggested a 0.2 percent increase.
According to May 15 data released by the Bureau of Labor Statistics, annual headline PPI inflation slowed sharply to 2.4 percent from 3.4 percent, slightly lower than the market estimate of 2.5 percent.
Core wholesale prices, which omit the volatile energy and food categories and are considered a more accurate inflation predictor, also declined by 0.4 percent in April. This was down from March’s upwardly revised 0.4 percent increase and lower than economists’ expectations.
Core PPI inflation eased to 3.1 percent from 4 percent year over year, in line with market watchers’ projections.
Economists monitor the PPI closely as it can signal pipeline inflation. The Federal Reserve watches producer prices closely as they contribute to the personal consumption expenditure (PCE) price index, the central bank’s preferred inflation report.
Later this month, PCE inflation is expected to come in at 2.2 percent, according to the Cleveland Fed’s Inflation Nowcasting model estimate.
This comes after the April consumer price index (CPI) revealed softening in cost pressures compared with a year ago.
The annual inflation rate slowed to a lower-than-expected 2.3 percent, the lowest level since February 2021. Core CPI inflation was unchanged at 2.8 percent.
Despite growing fears of stagflation—an economic climate of higher prices, rising unemployment, and slowing growth—these numbers should dissipate worries, according to Jamie Cox, a managing partner for Harris Financial Group.
“If you are in the stagflation camp, these data aren’t confirming your thesis. While growth is slowing, disinflation remains intact,” Cox said in a note emailed to The Epoch Times.
By Andrew Moran
