By Geoffrey Smith
Investing.com -- U.S. producer price inflation showed signs of peaking in April but remained in double digits, as the surge in energy prices in the wake of Russia's invasion of Ukraine weakened a little.
The annual rate of factory gate inflation fell to 11.0% from 11.5%, as the monthly rise in prices slowed to 0.5% from 1.6% in March. The monthly rise was in line with consensus forecasts.
The softening was due largely to energy prices, which had risen at 7.2% and 6.4% in the previous two months. That slowed to a rise of only 1.7% in April as crude prices eased somewhat after the initial shock of Russia's invasion.
But there were also signs of weakening price trends in the core PPI, which excludes volatile food and energy prices. Core PPI rose by only 0.4% on the month, less than the 0.6% expected and a clear slowdown from an upwardly-revised 1.2% in March. In annual terms, the core PPI eased to 8.8% from 9.6% a month earlier.
One of the product categories to show the steepest declines was softwood lumber, prices for which fell over 15% in April. That is consistent with other data points suggesting that the U.S. housing market is starting to lose its froth as the Federal Reserve raises interest rates, pushing the cost of mortgages sharply higher. The Mortgage Bankers Association's benchmark rate for 30-year home loans has risen by over 220 basis points since the start of the year to stand at 5.53% as of last week - its highest since 2009.
The PPI figures come a day after official data showed that consumer inflation also eased slightly from its 40-year peak last month, despite some pockets of continuing strong price pressure.
"The rate is likely to fall further over the next few months, though much depends on what happens to margins," said Pantheon Macroeconomics' Ian Shepherdson in a note to clients, arguing that margins "account for 30% of the core."
"The huge expansion in margins since COVID struck has been a key part of the surge in consumer inflation, he added. "A sustained decline in margins would change the overall inflation picture, but a decline in one month is not definitive."
Producer prices are generally seen as a leading indicator of trends for consumer inflation, although the relationship is prone to a high degree of elasticity.
Separately, the Labor Department also reported that initial jobless claims topped 200,000 for the second week in a row last week. Initial claims totaled 203,000, effectively unchanged from an upwardly-revised 202,000 the previous week. The figures indicate that lay-offs continue to run at a historically low rate as companies hoard labor in the face of acute skills shortages.