A key gauge of inflation surged by much more than expected in April, confirming that the pace of inflation has accelerated and dashing hopes for interest rate cuts this year.
The producer price index, 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.
Economists had forecast a 0.3 percent gain in April compared with March and a 2.2 percent gain year-over-year.
The so-called core producer price index—a measure that excludes prices of food and energy—also 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.
Another measure that also excludes wholesale and retail merchant margins known as trade services prices, rose 0.4 percent in April. Compared with a year ago, this “core core” measure is up 3.1 percent, the largest year-over-year gain since a year ago.
The producer price part of the measure’s name comes from the fact that the price changes are measured from the point of view of the seller of the goods rather than the buyer. That means they do not include sales or excise taxes or government subsidies that go to consumers. Shipping costs that are paid by consumers are also excluded. The prices of imports are not included because those are not received by U.S. producers but by foreign producers.
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.
