Producer Price Inflation Accelerates

Producer Price Inflation Accelerates

U.S. companies faced a notable increase in production costs in March, with prices for goods and services rising 4% compared to a year earlier. The surge was largely driven by higher energy expenses linked to the war in Iran. While the 0.5% monthly increase from February came in below analysts’ expectations, the annual gain marked the highest level since February 2023, according to the Labor Department.

Producer prices—often referred to as wholesale prices—can eventually feed into consumer costs, which are already climbing for items like gasoline. In March, energy prices jumped 8.5% from the previous month, fueled primarily by a sharp 15.7% increase in gasoline.

Rising fuel costs also pushed up prices across several sectors. Airline passenger services climbed 2.8% for the month, while transportation and warehousing rose 1.3%. In construction, higher energy costs played a significant role as material prices increased 2.2% from February and 4.8% year over year—the largest annual gain since January 2023, according to the Associated Builders and Contractors.

“The rapid increase in diesel prices since late February will raise shipping costs, putting upward pressure on virtually every construction material,” said chief economist Anirban Basu. Combined with ongoing supply disruptions and tariffs, construction material prices have surged 48.4% since February 2020.