U.S. Producer Prices Unexpectedly Decrease In March, Annual Growth Slows Dramatically

Reflecting a steep drop in energy prices, the Labor Department released a report on Thursday showing an unexpected decrease in U.S. producer prices in the month of March.

The Labor Department said its producer price index for final demand fell by 0.5 percent in March following a revised unchanged reading in February.

Economists had expected producer prices to come in unchanged compared to the 0.1 percent dip originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed dramatically to 2.7 percent in March from 4.9 percent in February. Economists had expected the pace of growth to slow to 3.0 percent.

The bigger than expected monthly decrease in producer prices came as energy prices plunged by 6.4 percent in March after slipping by 0.3 percent in February.

Meanwhile, the report said food prices climbed by 0.6 percent in March after slumping by 2.2 percent in the previous month.

Excluding prices for food and energy, prices for final demand goods rose by 0.3 percent for the second consecutive month.

The Labor Department also said prices for services fell by 0.3 percent in March after inching by up by 0.1 percent in February.

Prices for transportation and warehousing services tumbled by 1.3 percent and prices for trade services slid by 0.9 percent, while prices for other services inched up by 0.1 percent.

Excluding prices for food, energy and trade services, core producer prices crept up by 0.1 percent in March after rising by 0.2 percent in February.

The annual rate of growth by core producer prices slowed to 3.6 percent in March from 4.5 percent in February.

“Easing supply chain conditions and slowing momentum in demand have brought supply and demand into better balance, pushing producer prices sharply lower in March, though this report did benefit heavily from decreases to noncore items such as energy and trade services,” said Matthew Martin, US Economist at Oxford Economics.

He added, “We expect the bite from the Fed’s previous rate hikes will further reduce business and consumer demand, pushing producer price inflation lower throughout the rest of the year.”

A separate report released by the Labor Department on Wednesday showed a modest increase in U.S. consumer prices in the month of March.

The Labor Department said its consumer price index inched up by 0.1 percent in March after climbing by 0.4 percent in February. Economists had expected consumer prices to rise by 0.3 percent.

The report also showed the annual rate of consumer price growth slowed to 5.0 percent in March from 6.0 percent in February.

The year-over-year growth was slower than the 5.2 percent expected by economists and marks the smallest 12-month increase since May 2021.

Meanwhile, the report said core consumer prices, which exclude food and energy prices, rose by 0.4 percent in March after advancing by 0.5 percent in February. The increase matched economist estimates.

The annual rate of growth by core consumer prices accelerated to 5.6 percent in March from 5.5 percent in February, which was also in line with expectations.

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