Analysis: Market expectations overly focused on crude oil, with the US March PPI significantly below expectations

ME News Report, April 14 (UTC+8), Investinglive analyst Adam Button said that the U.S. overall and core PPI for March were both far below market expectations on both an annual and monthly basis. Given that market forecasts mainly focused on the anticipated surge in energy prices, the key question is where the deviation occurred. Although energy prices did rise sharply, the upside was smaller than expected: refined oil jumped (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 accounts for about 68% of the data and is the main reason the figures came in below expectations. One of the driving factors was a decline in trade profit margins, with retailers absorbing part of the energy costs rather than passing them on. Transportation prices rose 1.3%, but with only a 5% weighting, it was difficult to make up for the shortfall. Food prices fell 0.3% as well, further dragging down the overall data. In short, the market’s overly heavy focus on crude oil led it to underestimate three factors: the sharp drop in natural gas, the squeeze on trade profit margins, and the slowdown in core services inflation. The energy transmission effect is real, but its magnitude is narrower, while pricing power in other parts of the economy has weakened. (Jin10) (Source: ODAILY)