Goods prices soared 1.7 percent, accounting for almost 60 percent of the increase in the PPI last month. That was the biggest increase since December 2009 and followed a 1.4 percent rise in February. Prices for services shot up 0.7 percent after gaining 0.1 percent in February.
Stocks on Wall Street were trading higher. The dollar gained versus a basket of currencies. US Treasury prices were mostly lower.
The government has provided nearly $6 trillion in relief since the pandemic started in the United States in March 2020, while the Fed has slashed its benchmark overnight interest rate to near zero and is pumping money into the economy through monthly bond purchases.
Powell said on Thursday that while he expected a surge in demand and bottlenecks in the supply chain as the economy reopens, “it seems unlikely that will change the underlying inflation psychology that has taken deep roots over the course of many years.”
Employment remains about 8.4 million jobs below its peak in February 2020. Though vacancies have rebounded above their pre-pandemic level, competition for jobs remains stiff, limiting workers’ ability to bargain for higher wages.
But some economists do not share Powell’s inflation assessment, arguing that businesses have the capacity to pass on the higher production costs to consumers. Business surveys have indicated that customer inventories are at record lows and order books are full.
“The implication is that manufacturers potentially have the sort of pricing power we haven’t seen in years,” said James Knightley, chief international economist at ING in New York.
“With greater scope to pass these price rises on to customers, the obvious implication is that risks are increasingly moving in the direction of higher CPI readings.”
Fed Vice Chair Richard Clarida said on Friday if the expected jump in inflation did not reverse going into 2022, the US central bank “will have to take that into account.”
According to a Reuters survey, the consumer price index likely rose 0.5 percent in March, which would boost the year-on-year increase to 2.5 percent from 1.7 percent in February.
The report is scheduled to be released on Tuesday.
Wholesale energy prices increased 5.9 percent, accounting for 60 percent of the broad-based rise in goods prices in March. Energy prices rose 6.0 percent in February. Food prices climbed 0.5 percent last month.
Excluding the volatile food, energy and trade services components, producer prices increased 0.6 percent. The so-called core PPI gained 0.2 percent in February. In the 12 months through March, the core PPI accelerated 3.1 percent, the biggest rise since September 2018, after increasing 2.2 percent in February.
In March, wholesale core goods prices shot up 0.9 percent after gaining 0.3 percent in February. The Fed tracks the core personal consumption expenditures (PCE) price index for its 2.0 percent inflation target, a flexible average.
The core PCE price index is at 1.5 percent. Some of the PPI components, which feed into the core PCE price index, rose moderately last month.
Airline tickets increased 1.1 percent after jumping 3.7 percent in February. Healthcare costs rose 0.2 percent after dipping 0.1 percent in the prior month. Portfolio management fees rebounded 1.6 percent after dropping 1.1 percent in February.
