The inflation rate surged beyond expectations in April, indicating a faster pace of inflation. The producer price index for final demand, which tracks prices paid to U.S. businesses for goods and services, increased by 2.2 percent in April, the Department of Labor reported. Economists had predicted a 0.3 percent increase in April compared to March and a 2.2 percent increase year-over-year. The impact of the higher-than-expected figures for April was somewhat offset by a revision of the prior month’s estimate from a 0.2 percent gain to a 0.1 percent decrease.
The core producer price index, which excludes food and energy prices, rose by 0.5 percent in April, surpassing economists’ forecast of 0.2 percent. Over the year, core producer prices went up by 2.4 percent. Trade services prices, another measure excluding wholesale and retail merchant margins, increased by 0.4 percent in April. Compared to a year ago, this “core core” measure was up by 3.1 percent, marking the largest year-over-year gain in a year.
The producer price index reflects price changes from the seller’s perspective rather than the buyer’s, excluding taxes, subsidies, and shipping costs paid by consumers. The final demand component measures prices of sales to end-users such as government, household, business, and foreign buyers.
In April, the index for final demand services saw a 0.6 percent increase, the largest since July 2023. Final demand goods prices also rose by 0.4 percent in April after a 0.2 percent decline in March. The unexpected increase in inflation is likely to delay any rate cuts from the Federal Reserve until there is evidence that inflation is decreasing as desired.
