U.S. producer prices rebound above expectations in April, CPI inflation likely to have accelerated

The U.S. producer prices recovered in April, coming in stronger than consensus expectations. Producer prices rose 0.5 sequentially, as compared with the consensus projections of 0.2 percent. Stripping energy, food and trade, producer prices inflation accelerating more strongly, rising 0.7 percent sequentially. On a year-on-year basis, the headline PPI rose 2.5 percent. Excluding energy, food and trade, PPI inflation was up 2.1 percent.

The recovery throughout the PPI components in April report indicate much of the weakness in the earlier month is possibly a blip, and this is viewed it as a sign that the upward momentum in pipeline price pressures is sustained, noted Barclays in a research report. Stripping energy, food and trade services, core PPI personal consumption inflation accelerated 0.8 percent sequentially and 2.1 percent year-on-year.

“We expect inflation pressures to remain solid in the economy, as labor markets continue to tighten and the dollar and commodity prices are broadly stable”, stated Barclays.

The core CPI is expected to have accelerated 0.2 percent sequentially and 2 percent year-on-year, while headline inflation is likely to have risen 0.2 percent sequentially and 2.2 percent year-on-year.

“We view today’s PPI report as consistent with our call, although we see upside risks to our assumption of a soft print from core goods CPI in April”, added Barclays.