Wholesale Prices Fall 0.4% in March, Easing Inflation Ahead of Tariff Tensions
Uncertainty rippled through economic circles last month as wholesale prices took an unexpected dive. The 0.4% drop shocked analysts who’d bet on a 0.2% increase. Talk about getting it wrong. This decline follows two months of rising prices, when wholesale prices climbed 0.7%, according to the Bureau of Labor Statistics.
Looking at the bigger picture, wholesale prices are still up 2.7% compared to last year. But the trend is cooling off. The Producer Price Index recorded its first monthly decline since October. Core wholesale inflation—the fussy metric that ignores food and energy—dropped 0.1%. First time since July. Progress, right?
Despite the year-over-year 2.7% climb, wholesale inflation’s cooling trend shows promise. First decline since October—maybe we’re getting somewhere?
Gasoline prices deserve most of the credit, plummeting 11.1% in March and accounting for three-quarters of the decrease in goods prices. Food prices fell 2.1%, while overall energy costs dropped 4%. About 70% of the decline was attributed to final demand goods prices, which fell 0.9%. But if you exclude food and energy (because who needs those, apparently), prices for final demand goods actually rose 0.3%. Can’t win ’em all.
Egg prices deserve a special mention. They’re down a whopping 36.2% from last year. Remember that bird flu panic? Things have finally stabilized. Your breakfast just got cheaper. Egg prices tumbled 21.3% from February alone as markets continued to recover from supply disruptions.
This wholesale reprieve couldn’t have come at a more interesting time. The Trump administration announced tariff increases in April, kicking off fresh trade tensions with China. Steel mill product prices already jumped 7%, giving us a taste of what’s coming with those aluminum and steel import tariffs. Economist Oren Klachkin predicts we’ll see tariff passthrough to consumers in coming months. Services prices fell by 0.2% in March, adding to the overall easing of the inflation backdrop.
The current downward trend in inflation might be short-lived once these trade disputes really kick in. For the Federal Reserve, this is complicated stuff. Cooling wholesale inflation matches the 2.8% core consumer inflation rate—lowest in four years. This might support lower interest rates down the road. Economists think the slowdown could help keep mortgage rates down too.
But the Fed has to balance weak price growth against looming trade tensions. Consumers might see some relief at the gas pump and grocery store if these wholesale trends translate to retail. But don’t get too comfortable. Those tariffs are lurking like an unwelcome surprise on your credit card statement.
The economic weather forecast? Mostly sunny with a chance of trade war. Pack an umbrella.
