Producer Prices: Goods Lead Further Easing

Bottom Line:  Producer prices fell for the third time in the last four months in March. With core prices lower, the report was well below expectations. While there were upward revisions to previously reported, the trend remained decidedly lower. Goods prices were sharply lower, while services prices continued the more modest declines we started to see early this year. That said, goods remained the driver of producer prices, with most of the decline in services due to lower prices for services related to goods transportation and warehousing. Overall, headline producer prices have decelerated sharply, down 0.3% over the last three months and 2.8% over the last twelve months, after gains of 6.6% in the calendar year 2022. Core producer prices were running at just 1% annualized in the three months that ended in March, down from just under 3.5% in the prior twelve. While there will be volatility and lags for these kinds of readings to come through to consumer prices, the disinflationary trend in producer prices suggests we should continue to see a disinflationary trend in consumer prices.