The combined producer and import price index rose again in April. A 0.6 percent monthly increase was well above the market consensus and sharp enough to lift the annual inflation rate from minus 2.1 percent to minus 1.8 percent, still weak but also a 4-month high.

Domestic prices increased 0.2 percent versus March, nudging up their yearly rate from minus 0.5 percent to minus 0.4 percent. Import prices saw a much steeper 0.8 percent gain, lifting their annual rate from minus 5.4 percent to minus 4.6 percent.

Within the PPI, petroleum products (7.9 percent) again saw the largest monthly rise and added almost 0.1 percentage point to the overall increase. Computer, electronic and optical products and watches (1.1 percent) as well as electrical equipment (also 1.1 percent) recorded hefty rises too alongside furniture and other manufacturing (1.9 percent). The sharpest declines were in electricity and gas supply (1.2 percent) and agricultural and forestry products (1.1 percent). Import prices were similarly boosted by higher petroleum costs (3.6 percent) and furniture and other manufacturing (4.0 percent). Consequently, overall core prices increased a relatively large 0.4 percent versus March although with base effects positive, the annual underlying rate was only unchanged at minus 1.7 percent. This matched its lowest mark since October 2020.

The April update shows that pipeline price pressures in Swiss manufacturing may be on the turn. Core prices seem to be picking up and, while not yet an issue for the SNB, will leave the central bank that much more cautious about cutting the policy rate again as soon as next month. Today's report puts the Swiss RPI at 3 and RPI-P at minus 20. While overall economic activity is now essentially matching forecasts, the real economy continues to lag.

Prices are seen rising a further 0.2 percent on the month after a 0.1 percent gain in March.

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.