A key gauge of inflation surged by much more than expected in April, confirming that the pace of inflation has accelerated.
The producer price index for final demand, which measures the prices paid to U.S. businesses for their goods and services, rose by 2.2 percent in April, the Department of Labor said Thursday. Compared with a year ago, the index is up 2.2 percent, the largest increase in a year.
The impact of the higher-than-expected figures for April was somewhat softened because the prior month’s estimate was revised down from a 0.2 percent gain to a decrease of 0.1 percent.
The so-called core producer price index—a measure that excludes prices of food and energy—jumped 0.5 percent in April after calling 0.1 percent in March. Economists had forecast a 0.2 percent gain. Over the year, core producer prices are up 2.4 percent.
The final demand part of the measure’s name comes from the fact what is measured is the prices of sales to what are sometimes called end-users. That is, these are not sales of components or materials that are directly employed to create goods and services sold to consumers. These are products sold to customers who are government buyers, household buyers, businesses buying capital goods, and foreign buyers.
The index for final demand services rose 0.6 percent in April, the largest rise since jumping 0.8 percent in July 2023. Prices for final demand goods rose 0.4 percent in April after falling 0.2 percent in March.
The much hotter-than-expected inflation figure is likely to be seen as delaying any rate cuts from the Federal Reserve. Officials have said that they need to see evidence that inflation will continue to fall before they will begin reducing their federal funds benchmark interest rate.
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