US producer prices post surprise drop, easing inflation pressures

Inflationary pressures at the producer level in the United States cooled more than expected in March, offering fresh signs that pricing power may be fading across key parts of the economy.

US producer prices post surprise drop, easing inflation pressures

The Producer Price Index (PPI) fell 0.4% month-over-month in March 2025, marking the first decline in factory gate prices since October 2023 and sharply diverging from market expectations of a 0.3% increase. It was also the steepest drop in goods prices in over a year, driven largely by a dramatic 11% plunge in gasoline prices. Other notable declines were seen in diesel fuel, jet fuel, beef, eggs, and vegetables. Prices for services also eased, falling 0.2%—the most since July 2024—led by a 1.3% drop in machinery and vehicle wholesaling. Additional declines were recorded across airline tickets, food and apparel retail, and hotel room rates.

Core PPI figures

Core producer prices, which exclude the volatile food and energy categories, also surprised markets by slipping 0.1% on the month—the first drop in eight months and a stark contrast to forecasts of a 0.3% increase. Within core components, services saw a 0.2% dip, while trade and transportation prices declined by 0.7% and 0.6%, respectively. Core goods prices, however, edged up by 0.3%. On an annual basis, overall producer price inflation eased to 2.7%, the lowest reading in six months and well below the expected 3.3%. The core PPI also slowed to 3.3% year-on-year from February’s revised 3.5%, its lowest pace since September. The data offers a dose of relief for policymakers and investors alike, as it suggests that supply-side pressures are continuing to moderate—even in sectors once seen as inflation hotbeds. While the Federal Reserve remains cautious amid broader economic uncertainty, these figures could support arguments for holding interest rates steady in upcoming meetings.