US producer prices fell more than expected in March, offering a sign that inflationary pressures may be easing.
The Producer Price Index (PPI) declined 0.4% from the previous month, while the annual rate slowed to 2.7% from 3.2%, the Labor Department said on Friday.
A 4% drop in energy prices drove the monthly decline, mirroring weakness seen in consumer inflation data.
“Another sigh of relief on the inflation front – this morning’s PPI numbers were lower across the board, which will give the Fed room to maneuver,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management.
Zaccarelli noted that while recent flexibility in US trade policy is encouraging, “we are still cautious” without a lasting resolution.
“If three months go by and little progress is made on the trade front, then we may find ourselves right back where we started,” he warned.
Elsewhere, Bill Adams, chief economist at Comerica Bank, said the PPI report sheds little light on the broader inflation outlook, which he believes hinges on tariffs.
“Inflation will accelerate considerably if the tariffs stay in place,” Adams said, noting that while some firms may discount inventory in the short term, most will raise prices if they believe trade barriers are permanent.
Adams also warned that tighter immigration policies — including the cancellation of over 1.5 million visas — could drive up labor costs in key sectors like agriculture and home healthcare. “If people who lose visas exit the workforce, industries that rely on immigrant workers could face renewed labor shortages,” he said.
Both analysts highlighted the unpredictability of policy as a major source of risk. “The big caveat of course is that this could all turn on a dime with the next social media post,” Adams said.