US PPI rises 0.5% in March, below expectations as energy prices surge amid Iran conflict

An inflation gauge for the United States rose less than forecast. U.S. producer prices increased in March but well below expectations, even as the Iran conflict pushed energy prices higher and raised concerns about another round of inflation. The Producer Price Index (PPI) – a measure of input costs in the supply chain – rose 0.5% from a month earlier, well below the Dow Jones forecast of 1.1%, according to the U.S. Bureau of Labor Statistics report published on April 14. Excluding food and energy, core PPI rose 0.1% from the prior month, below the 0.5% estimate. The services component – a factor the Fed monitors closely – was essentially flat for the month. Year over year, total PPI rose 4%, the largest gain since February 2023. Core PPI was up 3.8% year over year. If trade services are also excluded, the index rose 0.2% from the prior month and 3.6% from the same period a year earlier. Trade services declined 0.3% in the month, indicating that businesses are absorbing tariff costs. Price increases at the producer level were weaker than the 0.9% rise in the Consumer Price Index (CPI) in March. If energy and food are excluded, the core CPI rose 0.2% month over month. Yet some components that directly influence the Fed's preferred inflation measure – the PCE – show rising pressures. Portfolio management fees rose by 1%, while health-care services also ticked higher. Combining CPI and PPI data, Bank of America estimates that March PCE inflation could be about 3.1% (headline) and 3.5% (core), higher than February's 2.8% and 3%. “These trends will likely keep the Fed on hold in the near term,” said Stephen Juneau, a strategist at BofA. Energy remains the main driver of the PPI rise. Gasoline prices surged 15.7%, contributing roughly half of the index's gain. Diesel prices rose as much as 42% and jet fuel 30.7%. As a result, commodity prices rose 1.6%, but were offset by services costs staying flat—an important gauge for the Fed given its smaller exposure to tariffs and war. Portfolio management fees — which had previously helped push producer prices higher — rose 1% month over month and 10.8% year over year. The market reaction to the report was muted, with stock index futures showing only modest gains and bond yields essentially flat. Although some March inflation gauges point to renewed price pressure, the Fed is likely to look through this if underlying trends remain stable and if the Iran ceasefire holds. Since the conflict cooled, energy prices have eased somewhat. U.S. WTI crude fell about 15% over the week but remains up nearly 70% from the start of the year. Fed officials remain cautious about the conflict's impact, but expect inflation to keep trending downward toward the 2% target this year. Nevertheless, the market currently expects the Fed to keep rates unchanged for most of 2026, with only about a 25% chance of a cut by year-end.