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First Cut: Final Demand PPI brought lower by energy in March

The Final Demand Producer Price Index for March was down 0.2% month-over-month and up only 0.7% compared to the year-ago month. The core PPI — excluding food, energy, and trade services — was also down 0.2% compared to February and up 1.0% compared to March 2019.

The decrease was due to a 6.7% fall in energy prices in March that might have been even larger except the PPI takes its read on energy costs relatively early int he month. Prices for foods were unchanged in March while trade services were up 1.4%.

Final demand for construction was up 0.1% month-over-month in March and up 3.7% compared to a year ago.

The PPI isn’t the most closely watched among the monthly inflation data, but overall the report will confirm expectations that inflation is going to remain tame and stubbornly below the Fed’s 2% objective. This will remain especially true with the appreciation of the US dollar against many currencies which will keep import costs for commodities in check.

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