Analysis: Market expectations overly focused on crude oil, March US PPI fully below expectations

ME News report, April 14 (UTC+8). Investinglive analyst Adam Button said that in the U.S. for March, both the overall and core PPI were far below market expectations on both a year-on-year and month-on-month basis. Given that market forecasts mainly focused on the expected surge in energy prices, the question is where the deviation occurred. Although energy prices did rise significantly, the extent of the increase was less than expected: refined oil surged (gasoline +15.7%, diesel +42.0%, etc.), but natural gas plunged 51.7%, partially offsetting the overall impact. Services unexpectedly remained flat (month-on-month 0.0%); this sector carries a weight of about 68%, and is the main reason the data came in below expectations. One of the contributing factors is the decline in trade profit margins, with retailers absorbing some of the energy costs rather than passing them on. Transportation prices rose 1.3%, but with only a 5% weight, it was difficult to make up the shortfall. Food prices fell 0.3%, further dragging down the overall figures. In short, the market’s overemphasis on crude oil led it to underestimate three factors: the sharp drop in natural gas, the compression of trade profit margins, and the slowdown in core services inflation. The energy transmission effect is real, but its impact is narrower, while pricing power in other parts of the economy has weakened. (Jin10) (Source: ODAILY)