The combined producer and import price index edged up a further 0.1 percent on the month in March, matching both its February advance and the market consensus. However, with base effects modestly negative, the rise was small enough to reduce the annual inflation rate from minus 2.0 percent to minus 2.1 percent, its second weakest reading since January 2021.

Both domestic and import prices similarly rose a monthly 0.1 percent, trimming the former's yearly rate from minus 0.3 percent to minus 0.5 percent but leaving the latter's unchanged at minus 5.4 percent.

Within the PPI, petroleum products (3.7 percent) again saw the steepest monthly gain ahead of textiles and shoes (1.6 percent). The only falls were in water treatment and waste management (0.7 percent) and agriculture (0.5 percent). Import prices were similarly boosted by higher petroleum costs (3.3 percent). Consequently, overall core prices increased 0.1 percent versus February, reducing the annual underlying rate from minus 1.4 percent to minus 1.7 percent, its lowest mark since October 2020.

The March update shows that pipeline price pressures in Swiss manufacturing remain very soft and the ongoing weakness of core prices will help to underpin speculation about another cut in the SNB's policy rate in June. It also leaves both the Swiss RPI (minus 20) and RPI-P (minus 8) in negative surprise territory showing that overall economic activity is still undershooting forecasts.

Prices are expected to rise a monthly 0.1 percent, matching the February gain.

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.