The combined producer and import price index for March rose 0.1 percent from February and contracted by 0.1 percent from a year ago, with core inflation matching both headline results.

Producer prices increased 0.1 percent on the month and 0.3 percent on the year. Tea, chocolate and coffee lovers could see higher prices ahead. From a year ago, prices for cocoa and chocolate products rose 26 percent and 9.6 percent for in processed tea and coffee. Offsetting this was an 11.3 percent drop in petroleum products.

Import prices were unchanged on the month while falling 0.9 percent from March of last year. Green coffee showed a 75.2 percent gain from a year ago, which was mitigated in the overall index by a 14.1 percent drop in the price of imported petroleum products.

At the same time, domestic sales of manufactured products were unchanged on the month and up 0.4 percent on the year, while export prices were up 0.2 and 0.1 percent.

Import prices will be an important gauge in the coming months to assess tariff impacts. The question is how much producers can absorb higher prices before passing them onto the consumer.

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.