The promises and promises are kept.
“When I win, I'll immediately lower the price and start on the first day,” Donald Trump said on the campaign trail last summer.
Critics argued that Trump's tariff plans would raise inflation without evidence. Many economists argued that price increases could fall, but prices did not fall, and that Americans simply had to adapt to new price levels.
However, in February, the final demand core producer price index fell by 0.1%. In other words, the prices (excluding food and energy) of goods and services sold by American companies have fallen.
A broader indicator of producer prices was flat for the month, indicating that there was no inflation in the month.
Both numbers were better than expected. Economists were further forecasting a 0.3% increase in the broad producer price index (PPI) and a 0.5% increase in core producer prices.
Producer Price Index (PPI) is often misrepresented as a measure of wholesale prices. This is a confusion that goes back to the original name as a wholesale price index. In fact, the index is not a measure of wholesale prices and was renamed in 1978.
The PPI of final demand measures the prices that US companies receive for personal consumption, capital investment, government purchases, goods, services sold for exports, and construction. They are paid to foreign producers, so sales tax paid to the government excludes export prices.
The well-known Consumer Price Index (CPI) tracks the prices paid by US consumers. This means that export prices are excluded, but they include sales tax. CPI also excludes prices paid by businesses, nonprofits and governments.
The two measurements may differ from one another for a particular month, but they are usually tracked together over time. Historically, neither is an indicator of other indicators. In February, both the broader CPI and core consumer prices rose 0.2%.
Year-on-year inflation measures continue to rise, a prolonged impact of the high inflation that persisted during Joe Biden's presidency. PPI has increased by 3.2% from a year ago, while Core PPI has increased by 3.4%. The January increase was revised up to 0.6% from 0.4%, indicating a surge in inflation occurred at the tail end of Biden's presidency, perhaps related to efforts to spend appropriate funds quickly in the last month to preempt Trump cancel payments and cut budgets.
Many analysts are looking for a scale that is often referred to as the “supercore” PPI. This excludes the food, energy and retail and wholesale profit margin scale known as “trade services.” That month, it rose 0.2%, up 3.3% from a year ago.
The PPI for final demand products increased by 0.3% in February, half the rate of increase in January. Prices rose 1.7% this year. Most of the inflation in the past year has been on the services side of the economy, where prices have risen by 3.9% for a year. However, in February, service prices fell 0.2%.
