Businesses felt the bite from inflation in March as prices for goods and services surged more than expected. The producer price index, or PPI, rose 11.2% year over year in March on a non-seasonally adjusted basis, the Labor Department said Wednesday. This is the largest increase since 12-month data were first calculated in November 2010, and follows a 10% increase in February. Economists’ had forecast PPI to rise 10.5%. PPI increased 1.4% last month on a seasonally adjusted basis, higher than expectations for a 1.1% uptick. “The severe imbalance between robust demand and handicapped supply will persist throughout Q2, keeping producer price inflation sticky and elevated until price pressures start to decelerate in the latter part of 2022,” wrote Mahir Rasheed, U.S. economist at Oxford Economics. “With a new wave of lockdowns in China and the war in Ukraine raging on, however, risks to the inflation outlook remain firmly to the upside, reaffirming our view that the Fed must proceed with a faster pace of policy normalization in the months ahead.” The surge hardly comes as a surprise given the inflationary environment, but the rate of its acceleration was faster than expected. The PPI measures the change in prices for goods as they leave the factory, and is considered by many the business version of the consumer price index, or CPI. March’s CPI data pointed to a breakneck 8.5% annual increase in consumer prices, or 1.2% in March alone. The silver lining of Tuesday’s CPI data was that core CPI, which excludes food and energy indexes, accelerated less than predicted, up 0.3% month over month. That figure led some economists to speculate that headline inflation may have reached a peak and would start to fall, but the PPI results highlighted that “the underlying pace of inflation remains very strong,” wrote Citi economist Veronica Clark.“We would caution that while core inflation might not climb substantially higher, the ‘peak’ could end up looking more like a ‘plateau’ in coming months,” she added. Excluding food and energy, the indexes for final demand goods increased 1.1% in March, higher than February’s 0.7% rise. Prices for final demand minus food, energy, and services rose 0.9% over the month, while the annual index rose 7%. Core goods rose at their strongest pace in the last two years, Clark said, and could reflect further increases in consumer prices. Diesel fuel prices jumped 20.4% in March, leading the increase for final demand goods. The indexes for gasoline, fresh and dry vegetables, iron and steel scrap, electric power, and jet fuel also moved higher. NN: it gets worse by the day. Inflation is embedded up and down the manufacturing chain. Which means it will be hard to beat out of the system.