Daily Spotlight: More Positive Inflation Readings

Argus

•

Mar 14, 2025

Summary

Two important inflation reports (the Consumer Price Index and the Producer Price Index) were released recently and both signaled that pricing pressures are easing (a bit). The reports both indicated that overall pricing pressures remain well below the peak rates in summer 2022. But both also confirmed that inflation remains above the Fed's target of 2.0%, and that it may take quite a while to get to that level. Let's first dive into the Consumer Price Index. The news here was surprisingly good, as the annualized headline number ticked lower from the previous month. The core inflation rate (ex-food and energy) also declined from the prior month. Perhaps the most encouraging data was related to Transportation Services and Shelter costs. In these sticky categories, year-over-year inflation rates declined meaningfully. Gas prices are sharply lower year over year, which should please consumers. Turning to the Producer Price Index, we note that the PPI measures pricing trends farther up the supply chain, at the manufacturing level. Here, the news was also generally positive. For example, the PPI final demand annual rate through February was 3.2%, compared 3.7% in January. Looking ahead, we expect pricing pressures to continue easing as the housing market cools due to high mortgage rates, supplies of new vehicles are replenished, and the price of oil stays below $90 per barrel (current pr