WASHINGTON (MarketWatch) — U.S. inflation at the wholesale level fell in March for the first time in seven months, owing to lower costs for services such as investment advice as well as cheaper fuel for cars and homes.
The producer price index slipped 0.1% last month to mark the first decline since August, the government said Thursday. Economists surveyed by MarketWatch had predicted no change in the PPI.
Still, some inflationary pressure is building for the first time in several years and prices could rise even higher. Over the past 12 months wholesale costs have risen 2.3%, the biggest increase in five years.
Just one year ago wholesale prices were basically flat. Prices have risen largely because of rebound in oil prices from last year’s lows, though the cost of many goods and services have also been creeping higher.
The Federal Reserve is on high alert for any sign inflation is quickening, a course that could spur the central bank to lift U.S. interest rates more aggressively. Yet while inflation is moving higher there’s little evidence it’s going to increase rapidly.
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Yields on U.S. Treasurys rose slightly.
In March, most of the decline in U.S. wholesale prices traced to lower costs for financial and other services.
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Lower energy prices also put downward pressure on wholesale rates.
The cost of gasoline sold by wholesalers sank by 8.3% in March, reflecting a leveling off in global oil prices after a runup that began in early 2016.
So-called core producer prices rose 0.1% in March and posted a 10th consecutive gain. The core price measure strips out fuel, food and retail trade margins – they can gyrate month to month – and gets more attention from the Fed and Wall Street.
The core rate has risen 1.7% in the past 12 months. That’s almost double compared to a year earlier, but down slightly from a recent two-year high of 1.8%.
The cost of partly finished goods, meanwhile, rose 0.1% in March while prices for raw materials fell 4.2%.
Still, prices of raw and partly finished goods are up sharply vs. a year ago and point to somewhat higher wholesale inflation in the months ahead.