PPI/CPI divergence
Producer Prices are at 3.9%—the highest this year—while CPI sits near ~1.87%, creating a margin‑squeezing PPI/CPI gap that complicates pricing power for firms (x.com). The same thread flags consumer confidence near the 2nd percentile, -92k jobs in Feb and GDP +0.7%, a mix that leaves the Fed stuck between rising input inflation and weak growth (x.com).
BLS data show producer prices for final demand jumped 0.7% in February and were up 3.4% year‑over‑year, with the “final demand less foods, energy, and trade services” measure rising 3.5% over 12 months. (bls.gov) The consumer price index rose 0.3% in February and was up 2.4% year‑over‑year, while CPI “all items less food and energy” (core CPI) was up 2.5% over the same 12‑month span. (bls.gov) That combination — PPI up ~3.4% YoY versus CPI at 2.4% YoY — leaves roughly a one percentage‑point gap between wholesale and consumer inflation on headline measures, and a similar gap on many core metrics. (bls.gov (bls.gov) The labor market weakened in February: nonfarm payrolls fell by 92,000 and the unemployment rate rose to 4.4%, with BLS citing strike activity in health care and weather disruptions as contributors. (bls.gov) The Bureau of Economic Analysis’ second estimate showed real GDP grew 0.7% annualized in Q4 2025, down sharply from earlier readings after downward revisions to consumer spending, exports, government spending and investment. (bea.gov) Policymakers and markets reacted: Fed Chair Jerome Powell left the policy rate unchanged on March 18 and noted inflation remains “somewhat elevated,” and futures pricing has shifted cuts further into the year after the hot PPI print. (federalreserve.gov (rateprobability.com))
