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

ME News report: On April 14 (UTC+8), Investinglive analyst Adam Button said that the U.S. March overall and core PPI both came in far below market expectations. Since market forecasts were mainly based on the expected surge in energy prices, the question is where the deviation occurred. Although energy prices did rise, the increase was smaller than expected: refined oil surged (gasoline +15.7%, diesel +42.0%, etc.), but natural gas crashed 51.7%, partially offsetting the overall impact. The services sector unexpectedly held steady (month-over-month 0.0%), and since the sector’s weight is about 68%, it is the main reason the data came in worse than expected. One of the driving factors was the decline in trade profit margins: retailers absorbed part of the energy costs rather than passing them on. Transportation prices rose 1.3%, but with a weight of only 5%, it was not enough to make up the gap. Food prices fell 0.3%, further dragging down the overall data. In short, the market’s overemphasis 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 relatively narrow, while pricing power in other parts of the economy has weakened. (Jin10) (Source: ODAILY)