The combined producer and import price index edged up 0.1 percent on the month in February, a tick less than the market consensus but its first increase since last October. The rise was enough to lift the annual inflation rate from minus 2.3 percent to minus 2.0 percent but this was still its second-weakest reading since January 2021.

Domestic prices also rose a monthly 0.1 percent, trimming their yearly rate from minus 0.1 percent to minus 0.3 percent. Import prices were marginally stronger, advancing 0.2 percent to lift their annual rate from minus 6.5 percent to minus 5.4 percent.

Within the PPI, petroleum products (1.7 percent) saw the steepest monthly gain while rubber and plastics (minus 1.5 percent) recorded the sharpest decline. Most other categories were broadly flat. Import prices were similarly boosted by higher petroleum costs (6.0 percent). Consequently, overall core prices dipped 0.1 percent versus January.

The February update reduces the underlying annual inflation rate from an already low minus 1.1 percent to minus 1.4 percent, equalling its weakest print since October 2020. Pipeline price pressures in Swiss manufacturing remain very soft which can only add to speculation about a possible policy rate cut from the SNB next week. However, today's data also put the Swiss RPI at 7 and the RPI-P at 5 meaning that overall economic activity is performing much as the forecasters expected.

Prices are seen up 0.2 percent on the month after a 0.5 percent fall in January.

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.