US Wholesale Prices Dip in March, Defying Market Expectations

Falling egg and gasoline prices helped to diminish the inflation burden.

Patrick Patterson walks to his vehicle after pumping gas at a Shell station in Miami, Fla., on April 10, 2025. Joe Raedle/Getty Images

Producer prices registered an unexpected drop in March, putting the U.S. economy in an increasingly positive inflation climate amid a global trade showdown.

New figures released by the Bureau of Labor Statistics (BLS) show that the producer price index (PPI)—a measure of prices paid for goods and services by businesses—fell 0.4 percent last month, down from the 0.1 percent jump in February. This was the first decline for the monthly metric since October 2023.

The consensus forecast suggested a 0.2 percent increase.

Core PPI inflation, which removes energy and food from the equation, dipped to a lower-than-expected 0.1 percent. In addition, core PPI inflation excluding trade services ticked up 0.1 percent.

The BLS said more than two-thirds of the decline in final demand prices occurred from the 0.9 decrease in goods prices. This was driven largely by a 21.3 percent plunge in egg costs and an 11.1 percent decrease in gasoline prices.

Services inflation also slipped 0.2 percent.

On a 12-month basis, headline PPI inflation and core PPI inflation slowed to a better-than-expected 2.7 percent and 3.3 percent, respectively.

Economists monitor wholesale prices as they can serve as a precursor for pipeline inflation since they are early in the supply chain.

Last month’s consumer price index (CPI) revealed that the headline annual inflation rate eased sharply to a six-month low of 2.4 percent from 2.8 percent in February. Consumer prices also tumbled 0.1 percent monthly for the first time since May 2020.

Bracing for ‘Tarifflation’

Are the latest batch of inflation reports, however, recording stale data?

Many developments have occurred, particularly on the trade front. President Donald Trump’s tariffs on automobiles, steel, and aluminum have gone into effect. The president announced an immediate increase in U.S. duties on Chinese goods to 145 percent. Trump’s 10 percent universal tariffs on nearly all nations’ imports have also taken effect.

This has led to widespread inflation concerns—Bill Adams, the chief economist for Comerica Bank, calls it “tarifflation.”

“Tarifflation will be much more important for the outlook than backward-looking data,” Adams said in a note emailed to The Epoch Times. “If tariffs stay in place, they will push inflation considerably higher in coming months.”

Senior administration officials and economic observers have wrestled with the tariff-driven debate.

In an April 6 interview with NBC’s “Meet the Press,” Treasury Secretary Scott Bessent says it might lead to a one-time price adjustment.

“There’s a big difference between insipid, endemic inflation within the system and consistent price level increases and a one-time adjustment,” he said.

RBC economists predict that 10 percent of U.S. consumer spending sourced from abroad could face renewed price pressures from higher tariffs.

“We expect U.S. core inflation to spike to 4.3 percent by the third quarter,” they wrote in a recent research note.

Core inflation recently fell below 3 percent for the first time in four years.

President Donald Trump holds a chart as he delivers remarks on reciprocal tariffs during an event in the Rose Garden at the White House in Washington on April 2, 2025. Brendan Smialowski/AFP via Getty Images

Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, suggests tariff effects will lead to renewed short-term inflation. While under-the-hood data in the March CPI revealed positive trends, Kashkari worries that century-high tariff rates could make the numbers “pretty stale.”

“After the pause, the effective tariffs are still 100-year highs. That suggests inflation, at least in the short term, will be going back up again,” he said in an April 11 interview with CNBC’s “Squawk Box.”

Reiterating what Federal Reserve Chair Jerome Powell noted in a recent speech, Kashkari stated that the central bank’s job is to ensure that long-term inflation does not become unanchored.

Short- and long-run inflation outlooks have risen among consumers. The preliminary April University of Michigan Consumer Sentiment Index reported one- and five-year inflation horizons climbing to 6.7 percent and 4.4 percent, respectively.

The Fed, meanwhile, can remain on the sidelines if these inflation numbers persist and high tariff rates are taken off the table, says Chris Zaccarelli, the CIO for Northlight Asset Management.

“But they are going to want to step in and cut if the economy deteriorates significantly, and higher inflation would slow them back in that case,” Zaccarelli said in a note to The Epoch Times.

Investors widely expect the Fed to keep interest rate cuts on hold at next month’s meeting. According to the CME FedWatch Tool, the futures market is betting on a quarter-point reduction to the benchmark federal funds rate in June.

Market Reaction

Despite the better-than-expected PPI report, U.S. stocks were still red in the week’s final trading session.

The leading benchmark averages, from the blue-chip Dow Jones Industrial Average to the tech-driven Nasdaq Composite Index, fell about 0.6 percent.

U.S. Treasury yields were up across the board, with the benchmark 10-year yield firming above 4.5 percent.

The U.S. dollar index, a measure of the greenback against a weighted basket of currencies such as the Japanese yen and the euro, plunged below 100.00 for the first time since July 2023.