Workers assemble a three-wheeled electric vehicle (FUV) at the Arcimoto manufacturing facility in Eugene, Oregon on April 19, 2021.

Alisha Jucevic | Bloomberg | Getty Images

Companies paid producers much higher prices for everything from steel to meat in April, another sign of inflation in an economy rapidly recovering from the pandemic. The new data comes a day after a sharp surge in consumer prices rocked the stock market.

According to the US Bureau of Labor Statistics, the producer price index rose 0.6% from March. PPI rose 6.2% year over year, the largest increase since the agency began collecting data in 2010.

Economists surveyed by FactSet expected a monthly increase of 0.3% in April and a year-on-year increase of 3.8%.

Stock futures were positive according to the report.

The core PPI, which excludes volatile items like food, energy and trade services, rose 0.7% in April from the previous month and rose 4.6% year over year. The year-over-year increase was the biggest jump since 2014, when the department first calculated the data.

The producer price index came into focus after Wednesday’s consumer price report showed above-expected inflation and sparked a large sell-off in the equity markets.

The Department of Labor reported that the prices American consumers pay for goods and services rose the fastest since 2008 last month, with the consumer price index up 4.2% year over year.

The producer prices measure the prices paid to the producers as opposed to the prices at the consumer level.

A sharp increase in steel mill products contributed to the rise in producer prices in April, the Ministry of Labor said. The prices of beef and veal, pork, domestic natural gas, synthetic resins, and materials and dairy products have also increased in the past month.

Steel product prices rose 18.4% in April from the previous month, while food prices rose 2.1%.

In addition to rising prices, base effects were one of the main reasons for the high annual pace, which meant inflation was very low at this point in 2020 as the Covid pandemic brought much of the economy to a standstill. Year-to-year comparisons will be skewed over the next several months, and the Federal Reserve has warned of these headlines, stating that the spikes will be temporary.

Price pressures will rise as the country tries to recover from the pandemic-triggered recession. While a spike in inflation is normal as the economy reopens, investors fear that if prices are sustained over a long period of time, it could squeeze corporate margins and detract from profits. Such a scenario could also force the central bank to rejuvenate its loose monetary policy.

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