uploads///US Producer Price Index Fell in March

US Producer Price Index Fell: Difficult Path ahead for the Fed

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Aug. 18 2020, Updated 6:16 a.m. ET

US producer price index fell

On April 13, the U.S. Department of Labor declared that its producer price index fell 0.1% in March—compared to a 0.2% drop in February. However, it didn’t meet Market expectations of 0.2% growth. The US (IVV) (VOO) (SPY) producer price index fell unexpectedly in March.

The fall in the cost of services is one of the major reasons behind this fall. The prices of services declined 0.2% due to the fall in the cost of trade and warehousing. It’s the first decline since October 2015. The producer price index rose 0.9% in the 12 months ending in March after rising by the same percentage in the 12 months through February.

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Weaker US producer prices suggest that inflation will stay below the Fed’s 2% target for now. There won’t be a huge improvement for inflation in the current scenario. Even the labor market showed little improvement. The Fed’s gradual rate hike process will be disrupted due to its key factor—inflation.

The Fed hiked its key benchmark interest rate for the first time in December after a decade. Economic indicators showed improvement at that time. Due to sluggish global economic (ACWI) (VEU) growth, the Fed took a dovish stance in March. Recently, policymakers forecast that only two more rate hikes are possible this year.

In the next part of this series, we’ll analyze how US retail sales performed in March.

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