U.S. April PPI Far Exceeds Expectations. Hits Three-Year High as Inflation Pressures Spread Across the Board and Crude Oil Shock Remains Main Factor

TradingKey - On Wednesday (May 13), the U.S. Bureau of Labor Statistics released PPI data, showing that April PPI year-on-year growth reached its highest level since December 2022, while month-on-month growth hit a new high since March 2022.

The U.S. PPI for April rose 6% year-on-year, exceeding the 4.8% expectation, and 1.4% month-on-month, higher than the 0.5% forecast. Core PPI, which excludes food and energy, rose 5.2% year-on-year, above the expected 4.3%; month-on-month growth was 1%, higher than the 0.3% estimate, indicating that inflationary pressures are spreading. Combined with yesterday's CPI data, this means U.S. inflation has heated up across the board.

Producer prices have continued to strengthen since the start of the year, partly due to rising energy costs caused by the war in the Middle East, along with simultaneous shortages of fertilizers, aluminum, and various consumer goods, which together have pushed prices higher. The 6% year-on-year PPI growth was partly because the low base effect from last year is gradually exiting the statistical window, thereby lifting current year-on-year readings.

Specifically, the year-on-year increase in commodity prices (including fuel) within the PPI reached its highest level since 2022, with energy costs rising 7.8% in a single month, extending the growth seen in March. Service sector prices rose 1.2% year-on-year, the highest in four years. Multiple factors combined to drive up the April PPI index.

The Bureau of Labor Statistics stated that within the PPI components, about three-quarters of the increase in commodity prices was driven by final demand energy prices; energy costs rose 7.8% this month, with more than 40% of that increase stemming from a 15.6% surge in gasoline prices.

Notably, the stronger-than-expected core indicators prove that factors beyond food and energy are also impacting the price index, indicating that inflationary pressures are beginning to spread to a broader range of goods and services, with room for further price pressure release in the future.

Following the release of the data, the 2-year U.S. Treasury yield briefly climbed back above the 4.00% mark, reaching its highest level since March, reflecting cooling market expectations for Federal Reserve rate cuts.