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Producer Prices: Core Prices Cool, Watch Steel

March 15, 2022
Bottom Line:  Producer prices rose as expected at the headline level, but in February, core metrics were slightly slower than expected. Prices in the final demand services category fell slightly on the month, even amid continued upward price pressures in trade services (mostly transportation costs). On the goods side, unprocessed goods, especially food and energy, saw continued upward price pressures. In contrast, processed goods saw notably lower prices, led by declines in milled steel products, which have been falling sharply for the last several months. Overall, pipeline price pressures remain significant but show hints of cooling. That said, it is too early to call a shift in the trend of accelerating inflation as much of the cooling in producer prices has been due to lower steel prices, which are heavily influenced by auto production, which has been incredibly volatile amid shortages of semiconductors that have been severe enough to halt production for many automakers.
The PPI ROSE by 0.8% in February, compared with market expectations for an increase of 0.9%. Overall producer prices are 10.1% ABOVE the year-ago level.
The Goods PPI
ROSE by 2.4% in February and is now 14.6% ABOVE its year-ago level. Food prices rose by 1.9% and are now 13.8% ABOVE their year-ago level.  Meanwhile energy prices rose by 8.2%. and are now 34.6% ABOVE their year-ago level. The Goods PPI less food and energy ROSE by 0.7%,  and is now 9.6% ABOVE its year-ago level.
The Services PPI
FELL by 0.0% in February but is now 7.8% ABOVE its year-ago level.
The Core
PPI ROSE by 0.2%, compared with market expectations for an increase of 0.6%.  Core producer prices are now 8.4% ABOVE their year-ago level.
Article by Contingent Macro Advisors