US producer prices increased in March from a year earlier by the most in 11 months, highlighting the sticky nature of inflation.

The producer price index for final demand rose 2.1 per cent from March 2023, Labor Department data showed on Thursday (Apr 11). On a monthly basis, the PPI increased 0.2 per cent after a sharp advance in February.

The so-called core PPI, which excludes volatile food and energy categories, rose 2.4 per cent from March 2023, and 0.2 per cent from the prior month.

The PPI data showed a third straight increase in the cost of services, which is proving to be the main reason why inflation has been stubborn.

Government figures on Wednesday showed an underlying measure of consumer prices topped forecasts for a third straight month, prompting traders to dial back expectations on how soon the Federal Reserve will lower interest rates.

One reason economists study the PPI report is because several categories are used to inform the Fed’s preferred inflation measure – the personal consumption expenditures (PCE) price gauge. The March reading of the PCE is due later this month.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Among those, prices paid for portfolio management increased 0.5 per cent, while the cost of hospital outpatient care was unchanged. More broadly, services costs rose 0.3 per cent, fuelled in part by higher airfares. Goods prices edged lower.

While Fed policymakers are awaiting a downshift in services inflation as they debate when to lower interest rates, the recent trend in goods deflation is at risk of stalling due to rising prices of oil and some other commodities.

Crude oil prices are hovering near the highest since October on geopolitical and supply concerns, threatening to raise production and transportation costs that could filter through to consumers. BLOOMBERG