Underlying U.S. producer-price inflation stayed muted in April

THE U.S. producer-price index increased 0.2% in April. / BLOOMBERG NEWS FILE PHOTO/SERGIO FLORES

NEW YORK – A measure of underlying United States inflation-pipeline pressures rose by less than forecast in April, suggesting Federal Reserve officials may need to await more data to validate their view that muted price gains will prove transitory.

Excluding food and energy, producer prices increased 2.4% from a year earlier, matching the slowest gain since last May and missing projections for an acceleration following the prior month’s 2.4% reading, a Labor Department report showed Thursday. The overall producer-price index increased 0.2% from March, also below estimates, after a 0.6% increase.

Key insights

The figures, which measure wholesale and other selling costs at businesses, offer an indication that inflation pressures in the pipeline are slightly weaker in the economy than thought. The report showed monthly declines in categories including thermoplastic resins and materials, traveler accommodation services and margins for some retail sectors. April consumer-price data to be released Friday are forecast to show pickups in core and overall inflation, which would go further to Fed Chairman Jerome Powell’s stance that the recent dip in underlying price gains will be temporary. At the same time, inflation remains broadly subdued, and investors expect the central bank to cut interest rates in the coming year, while President Donald Trump and his administration have kept up pressure on the Fed for a reduction in borrowing costs to supercharge the economy. Producer prices excluding food, energy and trade services – a measure preferred by some economists because it strips out additional volatile components – rose 0.4% from the prior month, and increased 2.2% from a year earlier after climbing 2%.

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A separate Labor Department report Thursday showed filings for unemployment benefits fell by less than estimated last week, keeping claims slightly elevated compared with the recent average. That may continue to reflect the late timing of the Easter and Passover holidays this year and associated spring vacations for Americans. Producer prices for goods rose 0.3% after gaining 1% the previous month. Services prices increased 0.1% after a 0.3% gain. Energy prices jumped 1.8% from the prior month, boosting the overall gauge, while food costs fell 0.2%. While the consumer price index is considered a more important indicator of inflation, data on producer prices help provide insights into the direction of input costs, and analysts monitor this data to assess how the gains will filter through to consumers.

Scott Lanman is a reporter for Bloomberg News.