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US April PPI Falls More than Expected

US wholesale prices declined more than expected in April, led by energy prices again, the Labor Department reported Wednesday.

The inflation data are all moving in the same downward direction, as sharply lower demand due to social distancing has kept prices depressed at both the wholesale and consumer levels. That trend is likely to continue until there is a pick-up in demand.

With some states moving toward business re-openings, followed by the eventually rehiring of most laid-off workers, prices should start to move higher in the coming months. However, it will be a long process and prices still likely to remain below their year-ago rates for several month.

Final demand PPI fell by 1.3% in April, well below the 0.5% decline expected, with a 19.0% plunge in energy prices the key factor.

The energy price decline was in line with the sharp drop in global oil prices and severely reduced demand for gasoline as consumers stay home, in contrast to normal seasonal patterns. Gasoline prices fell by 56.6%.

Excluding the volatile food and energy components, PPI was down 0.3%, below the 0.1% decline expected. The BLS’s preferred core measure, which also excludes a 1.6% gain in trade services prices, fell 0.9% in the month.

Through April, overall PPI prices stand 1.2% below their year ago level, while prices excluding food and energy were up only 0.6%, both down sharply from March rates.

Food prices were down 0.5% in the month after a flat reading in the previous month. While there were declines in most categories, there were solid gains in beef (+12.6%) and eggs (+31.8%) due to reported shortages.

Trade services prices were lifted by margins on several sectors, including fuels retailing even as prices plunged. Margins at securities brokers and investment advice firms fell sharply after solid gains in the previous two months.

Kevin Kastner

Julie Ros

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