US wholesale inflation data shows recent drop

According to the Associated Press, U.S. wholesale prices fell last month, a sign that inflationary pressures in the economy are easing more than a year after the Federal Reserve began aggressively raising interest rates.

A huge drop in wholesale gasoline accounted for much of last month’s sharp slowdown in producer prices, but even excluding volatile food and energy prices, so-called core wholesale inflation fell 0.1% in March. It was up just 3.4% from March 2022, the lowest year-over-year increase since 2021. Services prices fell 0.3%.

Wholesale inflation has come down steadily — from a record 11.7% year-over-year increase in March 2022 — since the Fed began raising its benchmark interest rate to fight the worst inflation bout in four decades.

Thursday’s figures follow a report Wednesday that showed that U.S. consumer inflation had eased in March, with less expensive gas and food providing some relief to Americans. Still, consumer prices continue to rise fast enough to keep the Fed on track to further raise rates. Core consumer inflation, in particular, remains stubbornly high, and Fed officials agreed that the banking industry’s recent troubles “would likely lead to some weakening of credit conditions,” as banks sought to preserve capital by curtailing lending to consumers and businesses.

On Wednesday, the Fed also revealed that its staff economists have forecast that a pullback in bank lending will cause a “mild recession” starting later this year. That was a shift from their previous estimates, which had predicted that the economy would eke out positive growth for 2023. At the same time, according to the minutes of last month’s Fed meeting, if the impact of the banking turmoil ends up being less than expected, a recession might be avoided.