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First Cut: Final Demand PPI slump in April on food and energy, trade services on the rise for a second month

The Final Demand PPI for April was down 1.3%, extending a string of declines to three months that was largely related to recent drops in energy costs. Overall the PPI was down 1.2% compared to April 2019. The core PPI – excluding food, energy, and trade services – was down 0.9% in April and down 0.3% compared to the year-ago month. Falling prices for commodities like food (down 0.5%) and energy (down 19.0%) are keeping overall price increases in check for producers.

However, it is notable that trade services costs were up 1.6% in April and up 1.4% in March as industrial production picked up again in China and else where after the factory closures associated with the pandemic quarantines.

Like the Consumer Price Index data for April, conditions related to the COVID-19 pandemic are creating fewer sources of upward price pressure in services where much of the impetus for higher prices has been in the past couple of years. During the period in which nonessential businesses are shutdown there is not going to be a lot of pricing data and competition for what business there is will be fierce and price sensitive while the economy is struggling to deal with the shock.

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