• Final Demand Producer Price Index (PPI) rose by 0.2% in April 2023, up 2.4% versus one year ago
• Core PPI, less Food & Energy, still outpacing topline price growth, up 0.2% (+2.9% year-over-year)
• Both Goods and Services PPI contributed to topline gains, up 0.2% and 0.3% for April 2023, respectively
• Transportation & Warehousing Services PPI continued to slump, indicating weakening economic conditions

The Producer Price Index (PPI) for April 2023 rose versus the month prior, up 0.2% versus March. This translates to a 2.4% year-over-year gain, which is down from the peak pace of 11.6% mark posted in March 2022. April 2023’s PPI gains undo some of the outright declines seen in March thanks in part to a bounce in Energy costs seen by producers during the month. That effect, however, will be short=lived as oil prices retreated quickly after OPEC’s late-March announcement of production cuts. Both Goods and Services Final Demand prices seen by producers rose in April 2023. But consumer demand continues to favor the services side of the U.S. economy, and so Services PPI inflation will likely have more staying power through the coming months. 

The 0.8% monthly gain in producers’ Energy prices follows two consecutive monthly declines in February and March. Overall, Energy prices are still down by 8.0% versus one year ago. While always a source of risk for higher costs, energy costs are not currently the primary threat to efforts by the Federal Reserve to cool overall inflation. Indicative of this is that Transportation & Warehousing PPI posted a sixth consecutive monthly decline, accelerating to an 18.8% annualized pace of decline in April 2023. Energy costs are a massive influence on this sector of the economy. Price declines in Transportation & Warehousing despite ongoing consumer demand suggest that Energy cost influences are not unduly pressuring businesses’ bottom lines. 

April 2023’s PPI report reinforces the line of thinking that inflation can be brought back in line with policymakers’ goals, but only by undermining consumer demand. The slowdown in annualized PPI gains from near 5.0% to start 2023 to under 3.0% in the April report – including outright price declines in March – coincides with clear signals of softening demand given by the Transportation & Warehousing sector. PNC continues to forecast a mild recession in the U.S. economy starting late in 2023. As the second half of 2023 wears on, producers may find their customers unable to weather higher costs themselves. Job cuts have already begun to spread beyond tech and financial services as businesses anticipate weaker demand and adjust their outlooks in anticipation of this trend.

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