U.S. producer prices surged again in March racing past expectations with their biggest monthly gain in 10 years.
The producer price index rose by 1.4%, compared to expectations for 1.1%. That took the annual rate of inflation for goods leaving U.S. factories to a record high of 11.2%. February’s data were also revised up to show an increase of 0.9%, from an initially reported 0.8%.
The data suggests that U.S. producers are still finding it relatively easy to pass on increases in costs for labor and raw materials, rather than accept any compression to their profit margins. Moreover, price increases weren’t confined to volatile elements such as food and energy. Even stripped of these, the ‘core PPI’ index rose 1.0% on the month for the second time in three months, while the annual rate rose to 9.2% from 8.7%.
As such, they raise the pressure on the Federal Reserve to accelerate its planned tightening of monetary policy.
“With a new wave of lockdowns in China and the war in Ukraine raging on…risks to the inflation outlook remain firmly to the upside, reaffirming our view that the Fed must proceed with a faster pace of policy normalization in the months ahead,” said the economist Mahir Rasheed in a note, adding that he expected the “severe imbalance between robust demand and handicapped supply” to persist throughout the second quarter. Price pressures will only start to abate “in the latter part of 2022,” he added.
The numbers came on the same day as JPMorgan CEO Jamie Dimon warned of “significant geopolitical and economic challenges ahead due to high inflation, supply chain issues and the war in Ukraine,” although he added that he remained optimistic for the U.S. economy in the short term. JPMorgan’s quarterly results showed its lending to corporates rose only 2% on the year in the three months through March, but Dimon noted that the bank is seeing a pick-up in both new loan demand and in the use of revolving credit facilities.