Zinger Key Points
- Producer prices stalled in February, with core inflation posting a rare decline, reinforcing hopes of easing cost pressures.
- Headline PPI was flat, while core PPI fell 0.1%, marking the first monthly decline since mid-2024
U.S. producer prices unexpectedly stagnated in February, while core inflation posted a rare contraction, reinforcing hopes that cost pressures may be easing despite lingering concerns over trade tariffs.
The Producer Price Index (PPI) remained flat on a monthly basis in February, a sharp deceleration from January’s upwardly revised 0.6% gain and below expectations of a 0.3% increase.
Core PPI, which excludes food and energy, fell 0.1% in February, marking its first monthly decline since July 2024. This came after January’s figure was revised higher to a 0.5% gain.
On a year-over-year basis, headline producer inflation eased to 3.2%, down from January’s upwardly revised 3.7%, while core PPI slowed to 3.4%, from a revised 3.8% in the previous month.
The weaker-than-expected producer inflation report follows Friday’s consumer price index data, which also came in softer than anticipated, strengthening the case for Federal Reserve rate cuts later this year.
Price Drivers: Food Jumps, Services Fall
The muted headline figure masked significant divergences across categories. Food prices surged 1.7%, largely driven by an extraordinary 53.6% spike in egg prices.
Other contributors to the increase included pork, fresh and dry vegetables, electric power, tobacco products, and carbon steel scrap.
Yet, gasoline prices fell 4.7%, exerting downward pressure on the overall index.
Meanwhile, the index for final demand services declined 0.2%, the steepest drop since July 2024, suggesting cooling inflationary pressures in service-related sectors.
Market Reactions
- U.S. dollar: The dollar strengthened despite the softer PPI report, with the U.S. dollar index.
- Treasury yields: The 10-year U.S. Treasury yield increased 2 basis points to 4.33% as markets reassessed inflation risks.
- Stock market: Selling pressure on equities resumed after a brief rebound on Wednesday. Futures on major U.S. indices recorded losses in the premarket trading, with S&P 500 futures down 0.2% at 8:39 a.m. ET.
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Originally Posted March 13, 2025 – US Producer Inflation Stalls In February As Services Costs Drop, Egg Prices Skyrocket
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