Wholesale inflation rose 11.2% a year in March, mainly due to an increase in the price of gasoline, the Bureau of Labor Statistics reported on Wednesday.
The increase was the highest on record since 2010. On a monthly basis, the index rose 1.4%, above estimates of a 1.1% gain.
Diesel fuel prices jumped 20.4% during the month. Beef prices, on the other hand, fell by 7.3%
The Producer Price Index report follows Tuesday’s Consumer Price Index showing that costs rose 8.5% in March on an annual basis, again fueled by increases in the energy prices, especially gasoline.
Both reports will do little to change the Federal Reserve’s narrative that interest rates are rising to fight the worst inflation since Ronald Reagan’s administration. The central bank raised rates by 25 basis points in March and is expected to raise them again, this time by 50 basis points, in May.
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However, there was a bright spot in the consumer price index for March, with the core inflation rate, which excludes energy and food costs, falling to 0.3% in March. vs. 0.5% in February as used car prices fell. Meat prices also slowed their growth.
“Used car prices fell 3.8% in March but are still 35.3% higher than a year ago and more than 48% higher than March 2020,” said Jeffrey Roach, Chief Economist at LPL Financial. “As global trade and shipping ports improve, auto manufacturing could likely get a respite.”
“As more cars hit the lots, consumers will have more options available and dealers will have more comfortable inventory levels, providing relief from the tight auto market,” Roach added. .
He noted that “beginning in February 2016, prices for new and used vehicles declined for more than two years as the economy continued to grow. This is definitely a “Goldilocks” scenario as prices have cooled without a hard landing. »
But the future course of inflation and the global economy depends at this stage on the direction of Russia’s war against Ukraine. JPMorgan Chase, a leading global bank, announced its first quarter results on Wednesday and noted a loss of $524 million due to the effects of sanctions and the disruption in bond markets caused by the war. The bank said it was increasing its credit reserves amid concerns about the economy.
“We remain optimistic about the economy, at least in the short term – consumer and business balance sheets as well as consumer spending remain at healthy levels – but we foresee significant geopolitical and economic challenges ahead due to high inflation, supply chain issues and the war in Ukraine,” CEO Jamie Dimon said in announcing the results.
Delta and American also gave positive forecasts in their revenue reports as travelers returned to the skies in the first three months of the year.
Meanwhile, the national average price for a gallon of gasoline fell to $4.08 Wednesday morning, according to AAA, down 25 cents from $4.33 hit on March 11 after the war in Ukraine. President Joe Biden highlights steps he has taken to combat soaring gas prices, including a one-million-barrel-a-day drawdown from the Strategic Petroleum Reserve and also the lifting of the ban on using an ethanol additive in the summer.
“I’m doing everything in my power through executive orders to bring prices down and deal with Putin’s price hikes,” Biden said Tuesday in Iowa, where he announced the ethanol move.