This morning, the monthly Producer Price Index (PPI) for March has (finally) come out, far ahead of expectations: +1.0% versus the +0.4% expected and the +0.5% reported in the previous month. Since the start of 2021, we’ve seen PPI headline numbers continue upward, but accelerating from where they were last fall, when gains were either incremental or non-existent. We haven’t seen a higher headline PPI figure since the fallout of the pandemic era, now more than a year ago.

Subtracting volatile food and energy prices, we still see a higher-than-expected +0.7%, well beyond the +0.2% consensus. Year over year, PPI is up 4.2%, which is the second highest level ever, following the +4.5% registered back in 2011. Energy blossomed 5.9% for the month, while Trade was +1% and Transportation +1.5%. These are all big numbers that detect inflation finally making its presence felt in the broad economy.

The PPI measures the change in prices on the producer side, which usually shows up in the Consumer Price Index (CPI) over time. March’s CPI report isn’t expected until Tuesday of next week; last month reported a headline of +0.4%. Should price hikes be moving rapidly through PPI and CPI metrics, we should expect a higher number for CPI in March, as well. Double month over month, like PPI? Perhaps that might be a bit much to ask.

But these sorts of numbers are what the Fed takes into account when assessing economic growth. Though we’ve already heard from Fed Chair Jay Powell more than once so far this week, and he has stated plainly that no Fed actions to reduce bond buybacks or increase interest rates until inflation reaches and maintains its optimum 2% levels (along with full employment), today’s PPI gains has got to have voting members of the FOMC paying attention.

Markets are not selling off heavy on the news, but indexes are mixed ahead of today’s open: the Dow is +35 points, the Nasdaq -85 and the S&P 500 -5 points. This is more or less a mirror image of what we’d been seeing earlier in the week, where the tech-heavy Nasdaq had been getting its groove back. Next week also brings us the first major batch of new Q1 earnings reports — which will flow heavier through the rest of the month and through much of May — which are expected to easily beat Q1 2020 comps.

Fed Chair Powell expressed concern yesterday for the bottom 20% in the U.S. economy, and called our ongoing recovery “uneven.” Stimulus checks have now gone out to more than 150 million Americans, which should help, as should the very active vaccination programs throughout the country, which will help us reach herd immunity before further variants make way to our shores and prove resistant to our Pfizer PFE or Moderna MRNA shots. We are in the midst of our Great Reopening.

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