us wholesale prices unexpectedly drop: inflation reprieve or a false dawn?

2025-04-11 general

Washington, Friday, 11 April 2025.
March saw an unexpected 0.4% dip in U.S. wholesale prices. The decline marks the first since October 2023. This offers a glimmer of hope amid concerns about upcoming tariffs. The Federal Reserve might rethink its monetary policy. Semiconductor giants like Nvidia, ASML, and TSMC could feel the impact. This drop could be a pivotal moment influencing economic strategies and market performance.

diving into the ppi numbers

The Producer Price Index (PPI) offers insights into future inflation [1]. March’s PPI showed a seasonally adjusted 0.4% decrease [1]. February saw a 0.1% increase, making March’s decline more notable [1]. Core PPI, which excludes volatile food and energy prices, also dropped by 0.1% [1]. The headline PPI showed a 2.7% increase over 12 months [1]. Excluding food, energy and trade services, the index was at 3.4% [1]. These figures suggest a cooling in wholesale inflation, but the full picture is complex [alert! ‘tariffs may offset this’] [1].

cpi and the fed’s dilemma

The Bureau of Labor Statistics (BLS) reported easing consumer price pressures [1]. The headline rate was down 0.1% to 2.4%, with a core reading of 2.8% [1]. March’s core CPI decreased to 2.8%, from 3.1% in February [3]. This is the lowest since March 2021 [3]. The anticipated rate was 3% [3]. Monthly, the core CPI rose 0.1% in March, below February’s 0.2% and the expected 0.3% [3]. These figures influence the Federal Reserve’s decisions on interest rates and monetary policy [4].

tariffs on the horizon

President Trump intensified tariffs against U.S. trading partners [1]. On April 9, Trump eased off “reciprocal” tariffs, starting a 90-day negotiation period [1]. However, a base 10% tariff remains on almost all imports [8]. Tariffs introduce uncertainty [4]. Higher import costs may pass to consumers [8]. Companies like Target and Volkswagen warn of rising prices [8]. Consumers are already stocking up in anticipation [8]. This behavior could drive prices even higher [8].

expert opinions and market reactions

Neel Kashkari, Minneapolis Fed President, saw “a lot of good news under the hood” in the CPI report [1]. However, he cautioned that inflation data quickly becomes outdated due to tariff news [1]. Analysts believe March’s CPI report might be the last mild one this year [4]. Kristina Hooper, Invesco’s Chief Global Market Strategist, noted recent U.S. policy actions could cause future inflation [4]. UBS analysts foresee rising prices for goods excluding food, energy, and transport in the coming months [4].

eggs buck the trend

Despite cooling CPI inflation, egg prices continue to rise [7]. March saw a 5.9% increase, reaching $6.227 per dozen, a 60.4% year-on-year rise [7]. Wholesale prices, however, fell to $3 per dozen by late March, nearly 50% down from early month prices [7]. February saw record highs above $8 per dozen [7]. Retailers are hesitant to lower prices due to supply concerns [7]. Economists predict prices between $2 and $6 per dozen in coming months as supply recovers [7].

fed policy and future outlook

The Federal Reserve faces a dilemma [8]. Should it cut rates to counter a tariff-induced slowdown or raise them to curb inflation [8]? Uncertainty is high [4]. The Fed’s March minutes showed concerns that tariffs could cause lasting inflation [4]. Some economists predict a rate cut in September, others foresee only one cut in December [4]. Traders have lowered their expectations, anticipating the Fed to begin cutting rates in June, with a total reduction of 0.75 percentage points this year [4].

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