U.S. wholesale prices fell in March, a sign that inflationary pressures in the economy are easing more than a year after the Federal Reserve began aggressively raising interest rates.
Plunging energy prices pulled the government’s producer price index down 0.5% from February to March; it had been unchanged from January to February. The Labor Department’s producer price index reflects prices charged by manufacturers, farmers and wholesalers. It can provide an early sign of how fast consumer inflation will rise.
A huge drop in wholesale gasoline accounted for much of the sharp slowdown in producer prices. But even excluding volatile food and energy prices, so-called core wholesale inflation fell 0.1% in March, the first such drop in nearly three years. The Fed and many private economists regard core prices as a better gauge of underlying inflation. Core wholesale inflation was up just 3.4% from March 2022, the lowest year-over-year rise since 2021.
Behind last month’s drop in core prices was a sharp decline in wholesale costs for warehousing and transportation. Overall services prices fell 0.3%, the first such drop since November 2020. Household appliance prices fell 1.4%, car prices 0.3%. But wholesale food prices rose 0.6%, including a 34% jump in egg prices.
Wholesale inflation has come down steadily — from a record 11.7% year-over-year increase in March 2022 — since the Fed began raising its benchmark interest rate to fight the worst inflation bout in four decades. Beginning in March of last year, the Fed has raised its key short-term rate nine times and is expected to do so again at its next meeting, May 2-3.