WASHINGTON: Amid a slight uptick in wholesale energy prices and a drop in food prices, producer prices edged up in April, for the fourth consecutive monthly increase, the Labor Department reported Wednesday.
As a result of the mixed bag, the annual inflation rate slowed sharply from March, which should relieve price pressures in the pipeline.
The Producer Price Index, which tracks the costs of wholesale goods and services, rose 0.1 percent in April after a 0.3 percent jump in the prior month, half the rate economists were expecting.
Excluding the more volatile food and energy components, PPI rose 0.2 percent, in line with the consensus forecast.
But the inflation rate for the latest 12 months slowed to 2.6 percent last month, four tenths lower than in March, and the slowest since December.
Another closely watched measure, which excludes food, energy and trade services, also slowed four tenths to 2.5 percent.
While the PPI does not exactly predict the more critical measures of consumer inflation, financial markets likely will take some comfort from the data that could ease the pressure on the Federal Reserve to raise interest rates faster.
"There are still inflation hotspots in the PPI, particularly transportation & warehousing, where a shortage of truck drivers has resulted in wage increases being passed, to an extent, in the form of price increases," Chris Low of FTN Financial said in a research note.
"But price increases are being offset by declines elsewhere," he said, adding "that should help calm Fed hawks."
Freight trucking rose 0.2 percent, and is up six percent compared to April 2017.
- Gasoline prices drop -
Among the key components of the wholesale inflation measures, energy goods rose 0.1 percent. But within that category, diesel fuel rose 1.8 percent and liquefied petroleum gas jumped 4.0 percent.
Those increases were offset by a 0.5 percent drop in residential electric power, and a 0.4 percent decline in gasoline.
Food prices fell 1.1 percent, but included some shocking figures, as it often does, such as a nearly 30 percent decline in unprocessed finfish, and a 24 percent drop in chicken eggs. Beef and veal fell six percent.
But Ian Shepherdson of Pantheon Macroeconomics cautioned that the food price decline is unlikely to be reflected in the Consumer Price Index for April due to be released Thursday.
"Note that the CPI measure of food prices often lags the PPI by a month, so the risk for tomorrow's CPI food component is still to the upside," he said.
In the services category, which ticked up just 0.1 percent in the month, auto and auto parts margins rose 1.4 percent and airline passenger services increased 1.3 percent, while traveler accommodation fell 3.2 percent.
Meanwhile, cellular phone services, which were much in the news for holding down overall inflation, saw a spike of 1.7 percent in April, after falling in the prior two months.
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