and Core Price Gains Moderated to 0.2%

The Producer Price Index (PPI) for February 2023 edged down by 0.1%. This translates to a 4.6% year-over-year gain, which is down from 5.7% in January 2023 and the peak pace of 11.6% in March 2022 from a year earlier. February’s 4.6% is the slowest year-over-year pace recorded since March 2021 (+4.1%), when inflationary pressures were just beginning to take center stage in the U.S. economy and globally. 

The core PPI rose by a modest 0.2% in February and remained up 4.4% from a year ago. Food prices fell 2.2% as egg prices “cracked” by 41% reversing just over half of their price surge in the previous four months. Fruits and veggie prices also declined as did beef and pork prices. Producers’ energy prices dipped by 0.2% in February 2023 versus the month prior, driven lower by a 9.7% decline in residential natural gas prices. Gasoline prices rose 4.2%. 

A modest win in the battle against inflation came by way of a second straight monthly decline of 0.1% in producers’ final demand services prices in February 2023. The services component has been the strongest part of consumer spending since early 2022 and has thus been a key focus of the Fed’s inflation-fighting narrative as they attempt to cool demand where dollars have been flowing most freely. 

Consumers have shown little retreat on the spending front, so at least a small dip in services providers’ prices should relieve the impetus for those costs to be passed on to consumers. PNC continues to forecast a mild recession in the latter half of 2023 resulting in large part from consumer demand hitting a wall as costs have risen for both necessities and recreational/discretionary spending – the latter comprising many services spending categories