The producer price index in March came in very soft due to lower energy prices. The overall PPI fell 1.2 percent after firming 0.1 percent in February. The March drop was well below the consensus forecast for a 0.1 percent rise in the headline PPI. The core PPI rate eased to no change after a 0.2 percent boost in February. The latest core number was lower than market expectation for a 0.2 percent increase. The latest headline number was pulled down by an unexpected fall in energy costs. Energy fell 5.5 percent after a 1.3 percent gain in February. Food declined 0.7 percent after dropping 1.6 percent in the prior month.
Major component moves were by gasoline, which fell a monthly 13.1 percent in March while heating oil dropped 13.2 percent. Declines in food prices were widespread. Light trucks declined 0.4 percent and passenger car prices dipped 0.2 percent.
For the overall PPI, the year-on-year rate fell to minus 3.6 percent in March from down 1.6 percent the month before (seasonally adjusted). The core rate slipped to up 3.8 percent from up 3.9 percent in January.
Today's numbers should be good for bond prices, easing yields. A weak retail sales report this morning also should help soften yields and weigh on equities. Stocks will have a quandary focusing on Goldman's good earnings after close yesterday and the weak economic news this morning.
Market Consensus Before Announcement
The producer price index in February rose a modest 0.1 percent, following a 0.8 percent boost in January. Meanwhile, the core PPI rate eased to 0.2 percent rise after a 0.4 percent increase the prior month. For the headline number, the slowing was primarily due to a 1.6 percent drop in food prices. Energy increased 1.3 percent after a 3.7 percent boost in January. Looking ahead, a rebound in oil prices is likely to boost the headline PPI in March.
