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Producer Price Index slightly stronger than expected in March

Kitco News

(Kitco News) - Wholesale inflation pressures were slightly stronger than in March even as the global economy grinded to a halt due to the ongoing COVID-19 pandemic.

Thursday, the U.S. Labor Department said its Producer Price Index (PPI) fell 0.2% in in March following February’s drop of 0.6%; however, the data was stronger than expected with economists’ forecasting a 0.3% decline.

Meanwhile, core inflation, which strips out food and energy costs, rose 0.2% last month, following’s February’s decline of 0.3%. Core inflation was better than expected as economists were expecting an unchanged reading.

Many economists are dismissing the latest producer inflation data as the report did not capture the full impact the coronavirus is having on the global economy. Last month oil prices dropped to an 18-year low as prices fell below $20 a barrel. Economists note that weak oil prices alone should drive inflation lower through the year.

Economists also expect that the coronavirus will push the global economy into a recession, which will further limit inflation pressures.

Commodity analysts have noted that the pandemic has created unprecedented demand-side destruction as people around the world are required to stay at home as much as possible to slow the spread of the deadly virus.

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