The large upside surprise to the PPI in February confirms that stronger inflationary pressures were already making their way through supply chains even prior to the surge in oil prices. Final demand PPI rose by 0.7% m/m with only a modest positive contribution to that from energy prices and trade services margins. Excluding trade services margins, the core PPI increased by 0.5% m/m and is up 3.5% over the past 12 months. Core goods PPI rose by a more modest 0.3% m/m, with some of that strength driven by electronic prices not related to tariffs. In particular, electronic components and accessory prices surged by 10.3% m/m. The big 0.6% m/m gain in underlying core services PPI was primarily due to a 2.8% m/m rebound in cable subscriptions, a 2.3% m/m increase in application software publishing, a 4.2% jump in securities brokerage services and a 5.7% surge in traveller accommodation services.
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