In March 2022, the Producer Price Index (PPI) for final demand increased by 1.4% on a seasonally adjusted basis. This follows monthly increases of 1.2% in January 2022 and 0.9% in February. On an unadjusted basis, the PPI has risen by 11.2% for the 12 months ending in March 2022, the largest 12-month increase since the data was first compiled in this manner in November 2010.
The monthly rise of 1.4% in March also equates to a compound annualized growth rate (CAGR) of 18.2%. In general, the PPI is a gauge of inflation that measures increases to input costs faced by the producers of goods and services. Because it measures price changes before they reach consumers, some analysts see it as an earlier predictor of inflation than the CPI.
- The Producer Price Index (PPI) for final demand was up by 1.4% in March 2022.
- It has risen by 11.2% over the past 12 months, and the current annualized pace is 18.2%.
- This follows monthly increases of 1.2% in January and 0.9% in February.
- The index for goods was up by 2.3% in March, and the index for services rose by 0.9%.
- Higher consumer price inflation may be ahead.
High Level Detail
In March 2022, driving the overall rise of 1.4% in the PPI for final demand was an increase of 2.3% for final demand goods. The index for final demand services was up by 0.9%. Prices for final demand less foods, energy, and trade services increased 0.9% in March 2022, the largest advance since the 1.0% rise in January 2021. For the 12 months ending in March 2022, the index for final demand less foods, energy, and trade services moved up by 7.0%.
Final Demand Services Detail
As noted above, prices for final demand services rose by 0.9% in March. This was up from a rise of 0.3% in February.
In March, over 40% of the advance in the prices of final demand services can be traced to a 1.2% rise in profit margins for final demand trade services. The trade indexes measure changes in the profit margins received by wholesalers and retailers. Prices for final demand transportation and warehousing services and for final demand services less trade, transportation, and warehousing also moved higher, climbing 5.5% and 0.3%, respectively.
A surge of 22.7% in profit margins for fuels and lubricants retailing was a major driver of the March advance in prices for final demand services. Other key increases were in the indexes for: truck transportation of freight; traveler accommodation services; airline passenger services; inpatient care; and hardware, building materials, and supplies retailing. Meanwhile, prices for securities brokerage, dealing, and investment advice fell by 5.4%. The indexes for portfolio management and for automobile retailing (partial) also declined.
Final Demand Goods Detail
As noted above, prices for final demand goods rose by 2.3% in March. This was the same as in February.
More than half of the total increase for final demand goods in March resulted from a 5.7% jump in
prices for final demand energy. The indexes for final demand goods less foods and energy and for
final demand foods also moved higher, by 1.1% and 2.4%, respectively.
Leading the March increase in the index for final demand goods, diesel fuel prices jumped 20.4%. The indexes for gasoline, fresh and dry vegetables, jet fuel, iron and steel scrap, and electric power also moved higher. However, prices for beef and veal fell 7.3%. The indexes for natural gas and for cold rolled steel sheet and strip also declined.
Intermediate Demand Overview
Within intermediate demand in March, prices for processed goods increased by 2.1%, the index
for unprocessed goods fell by 1.4%, and prices for services rose by 0.6%. The 12-month increases in these measures were, respectively, 21.7%, 40.8%, and 7.4%.
The index for processed goods for intermediate demand increased 2.1% in March after rising 1.5% in February. Over 60% of the advance in March was driven by prices for processed energy goods, which moved up 6.4%. Included in processed energy goods is jet fuel, up by 23.0%. The indexes for processed materials less foods and energy and for processed foods and feeds also increased by 0.8% and 2.0%, respectively.
Prices for unprocessed goods for intermediate demand decreased by 1.4% in March after increasing by 13.0% in February. The decline in March was primarily the result of an 11.2% drop in the index for unprocessed energy materials, which include natural gas prices, down by 30.1%. However, prices for unprocessed nonfood materials less energy and for unprocessed foodstuffs and feedstuffs moved higher, by 9.5% and 5.2%, respectively. Prices for iron and steel scrap jumped by 27.6%.
Final Demand vs. Intermediate Demand
Examples of final demand goods include pharmaceutical preparations destined for personal consumption, construction machinery and equipment for private capital investment, diesel fuel and jet fuel for government, and organic chemicals for export. Examples of final demand services include consumer loan services, apparel retailing margins, passenger air transportation, wired and wireless telecommunication services for government, wholesale margins from machinery and equipment sold for capital investment, and wholesale margins from organic chemicals sold for export. Examples of final demand construction include new school construction and new hospital construction.
Intermediate demand, meanwhile, measures price changes for goods, services, and construction sold to business as inputs to production.