Svmuu News Investinglive analyst Adam Button stated that both the year-over-year and month-over-month rates for the overall and core US March PPI were significantly below market expectations. Considering that market forecasts were primarily centered around the anticipated surge in energy prices, the focus is on identifying where the deviation occurred. Although energy prices did rise sharply, the increase fell short of expectations: refined products surged (gasoline +15.7%, diesel +42.0%, etc.), but natural gas plummeted by 51.7%, partially offsetting the overall impact. Services unexpectedly remained flat (month-over-month 0.0%); this sector, with a weight of about 68%, was the main reason the data fell short of forecasts.
One of the driving factors was a decline in trade margins, with retailers absorbing some of the energy costs rather than passing them on. Transportation prices rose by 1.3%, but with a weight of only 5%, it was difficult to fill the gap. Food prices fell by 0.3%, also dragging down the overall data. In short, market expectations were overly focused on crude oil, underestimating three factors: the sharp drop in natural gas, the compression of trade margins, and the slowdown in core services inflation. The energy transmission effect is real but limited in magnitude, while pricing power in other parts of the economy has instead weakened. (Jin10)