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Producer Price Index up 0.5% as Trade Margins Expand

The Producer Price Index (PPI) for final demand increased a seasonally adjusted 0.5% for March, according to a Labor Department report (link opens as PDF) released today.

"Final demand" is a more comprehensive indicator than that for finished goods alone. It includes goods, services, and construction sold for personal or government use, capital investment, and export.

After dipping 0.1% for February due primarily to tighter retail margins, this latest report puts PPI growth solidly back in the black. Analysts had expected a recovery, but their 0.1% estimate proved too conservative. 

Source: Labor Department 

Diving deeper, a 0.7% jump in final demand services was the main source of the latest month's price increase. The boost came mostly from trade indexes prices, which measure the change in margins received by wholesalers and retailers. According to the Labor Department, over 60% of this month's margin expansion came from final demand trade services, which soared 1.4%.

Final demand prices for goods stayed steady after February's boost, although a closer look shows uneven price movements. While food prices increased 1.1%, energy prices took a 1.2% dip.

Excluding more volatile food and energy prices, the overall index shows even stronger gains, up 0.6% -- analysts had expected a 0.2% rise.


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