Producer Price Index (PPI)
Today’s big economic news was the release of March’s Producer Price Index (PPI) that showed inflation at the wholesale level of the economy was much softer than expected last month. The overall PPI reading that includes gas prices rose only 0.5% when it was expected to jump 1.1%. More importantly, the core reading that excludes volatile food and energy costs was up only 0.1%, falling well short of the 0.4% that was predicted. Those lower monthly readings allowed the year-over-year readings to come in below expectations also. In short, wholesale inflation wasn’t nearly as bad last month as many had expected. A spike in gas prices as a result of the Iran war had feared higher inflation readings. Therefore, we can easily label this report very good news for bonds and mortgage rates. In fact, it is such good news that it is surprising the bond market hasn’t had a more noticeable reaction to the news.