Data on producer prices shows continued signs of pressure for overall inflation in the economy as announced tariffs led to a jump in steel prices in March. Trucking prices leveled off in March but remain strong relative to this point last year, and other modes of freight such as intermodal are experiencing rapid gains
The Bureau of Labor Statistics reported that the producer price index (PPI) rose 0.3% in March from February’s levels and is now 3.0% higher than at this point last year. This beats consensus expectations of a 0.1% gain and marks the fastest pace of year-over-year wholesale inflation in over six years. (Story continued below)
The recent announcement of tariffs on steel and aluminum imports appeared to have some effect in March, as prices on steel mill output rose nearly 2% during the month. This reinforces some of the responses from national and regional manufacturing surveys, who reported big gains in steel prices in the immediate aftermath of President Trump’s tariff proposal.
Trucking rates are elevated and intermodal is following suit
Details within the trucking industry showed some signs of calming in March after big monthly gains in January and February. The producer price index for general freight trucking services remained unchanged in March from February’s levels, with results in both truckload and LTL registering only small changes in March.
Despite the tame monthly results in March, trucking inflation remains elevated in general in the economy. Year-over-year growth in long distance truckload prices pushed to a fresh six-year high of 6.8% in March. Yearly inflation in the LTL space also climbed during the month, remaining near 8% in March.
In addition, details from the PPI report suggest that other modes of transportation are also beginning to see rising rates. While inflation in rail freight overall has remained fairly tame, intermodal rail freight rates have climbed rapidly. PPI data for intermodal rail has surged over the past couple of months and climbed a whopping 4.5% in March from February’s levels. Intermodal prices are now over 13% higher than at this point last year, in a sign that some of the pricing pressure from the trucking industry might be spilling out into other modes of transportation.
Behind the Numbers:
The surprise in the headline PPI number falls in line with much of the other data from manufacturing in March that showed that tariffs were being felt throughout the sector. This impact may be short-lived however, as the jump in steel prices likely reflected the perceived impact of the steel tariffs upon announcement. The actual steel tariffs were far less impactful, with exemptions given out to most of the US’ major trade partners in steel and aluminum. Still, the data is insightful in that it helps illustrate how these types of tariffs filter into the domestic economy. With threats of many other tariffs on the horizon, these kinds of price jumps may become more common in targeted industries.
On the freight side, the calmness in the month-to-month changes in trucking prices is a sign of some normalcy after a very volatile winter. The industry remains under pressure from many sides however, and the high yearly inflation is unlikely to go anywhere any time soon. The macroeconomy overall looks like it took a bit of a breather during the 1st quarter, but demand is expected to be stronger for freight as the US economy looks to gain some momentum in the 2nd quarter and beyond. The spillovers into intermodal provide some additional evidence that shippers may be looking towards other modes wherever possible to deal with a capacity strapped trucking sector. The typically slower and cheaper intermodal may be an attractive option for some types of freight that would otherwise travel by long distance truck.
Ibrahiim Bayaan is FreightWaves’ Chief Economist. He writes regularly on all aspects of the economy and provides context with original research and analytics on freight market trends. Never miss his commentary by subscribing.