US wholesale prices fell in March by the most since October 2023, restrained by energy costs and adding to evidence of muted inflation ahead of the Trump administration’s tariffs on US trading partners.
The producer price index dropped 0.4% from a month earlier, according to a Bureau of Labor Statistics report released Friday. The median forecast in a Bloomberg survey of economists called for a 0.2% gain. Excluding food and energy, the PPI eased 0.1%, also below estimates.
The figures mirror data published Thursday by the BLS that showed consumer prices also fell last month, for the first time since 2020, thanks in part to a decline in energy costs. Economists expect inflation to accelerate over the remainder of the year as sweeping tariffs on imported goods imposed this month by President Donald Trump filter through into higher prices for businesses and households.
Friday’s numbers indicated that, for now, rising prices of imported goods are being offset by compression in wholesaler and retailer margins, suggesting businesses were absorbing costs from smaller tariffs that were already in place last month.
“Retailers’ margins are already being squeezed,” Samuel Tombs, the chief US economist at Pantheon Macroeconomics, said in a note after the release. The numbers suggest “consumers will be shielded from some of the forthcoming increase in manufacturers’ selling prices and import prices,” he said.
The report showed goods prices excluding food and energy rose 0.3% in March for a second month, marking the biggest two-month increase in two years. Oil field and gas machinery, sanitary paper products and x-ray equipment registered the biggest increases.
Services prices, however, fell 0.2% — the most since July — as wholesale and retail margins continued to narrow. Retailers of items like televisions, sporting goods, motor vehicles and apparel saw the biggest declines in margins.
In early February, the Trump administration put in place an additional 10% levy on goods imported from China, bringing the total to 20%. Since then, in a series of announcements after retaliation by Beijing, the president raised the total duty on Chinese goods to 145%.
Earlier this week, Trump announced a 90-day pause on higher tariffs on most other US trading partners, opting instead for a 10% tariff on imports. In addition, higher duties on aluminum and steel went into effect March 12. The overall impact on prices from these action may show up more clearly with the release of the April PPI data next month.
Fed Measure
Analysts also pay close attention to the PPI because some of its components are used to calculate the Federal Reserve’s preferred measure of inflation that’s based on the personal consumption expenditures price index. Those categories were generally favorable in March: airfares fell by 0.4% and hospital services costs rose at a slower rate. The PCE report will be published later this month.
While increased tariffs risk driving prices higher, subdued prices of many commodities may help temper the degree of pass-through to consumers and customers of the nation’s producers.
A Bloomberg metals index that includes aluminum, copper, nickel and zinc — key inputs for manufacturers — is hovering near the lowest level since 2020. Moreover, crude oil prices have sunk to around $60 a barrel — close to four-year lows. Grains and livestock prices have also cooled.
The March PPI report showed food prices slid 2.1% while energy costs dropped 4%. The costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, were flat. Unprocessed goods prices decreased 4.1%, reflecting declines in foodstuffs and energy materials.
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