The combined producer and import price index rose 0.2 percent on the month in March. The increase, which was in line with the market consensus, trimmed the annual inflation rate from 2.7 percent to 2.1 percent, its lowest mark since April 2021.

Domestic producer prices were up 0.3 percent versus February, reducing their yearly rate from 3.0 percent to 2.7 percent. Import prices edged 0.1 percent firmer to cut their annual change from 2.3 percent to 1.0 percent, the weakest reading since March 2021.

Within the monthly change in the PPI, textiles and clothing (2.5 percent) saw the steepest gain ahead of food, drink and tobacco (2.3 percent) and motor vehicles, parts and other transport equipment (2.0 percent). Most other categories posted little change although petroleum products fell 1.0 percent. The increase in import prices was largely due agricultural products (4.7 percent) which alone added almost 0.1 percentage point. As a result, the underlying composite index rose 0.1 percent versus February, lifting the annual core inflation rate from 2.2 percent to 2.5 percent, its fourth successive rise and matching a 7-month high.

Accordingly, while pipeline inflation pressures in Swiss industry remain at manageable levels the recent acceleration in the core rate will not sit well with the SNB. More generally, today's report puts the Swiss ECDI at minus 32 and the ECDI-P at minus 19. Both values show that overall economic activity is underperforming market expectations.

Prices are expected to rise 0.2 percent on the month following a 0.2 percent drop in February.

The producer price and import price index focuses on the actual prices of products on the market (transaction price) at the time of the order. The prices of domestic products are taken at the producer or factory level, excluding value added tax and consumption taxes. For imports, prices are collected at the Swiss border, without the value added tax, taxes on consumption and tariffs. Changes in the index provide a guide to inflation from the point of view of the product's producer/manufacturer

The producer price and import price index measures prices at the producer level before they are passed along to consumers. Since the producer price index measures prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months. Producer and import prices are more volatile than consumer prices. While the CPI is the price index with the most impact in setting interest rates, the producer price and import price index provides significant information earlier in the production process. The producer price and import price index is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or they taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace. The bond market rallies when the producer price and import price index decreases or posts only small increases, but bond prices fall when the index posts larger-than-expected gains. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.