CFD Markets News and Forecasts — 11-03-2021

FXStreet notes that the U.S. weekly jobless claims report showed better-than-expected numbers in both, initial and continuing claims. Analysts at Wells Fargo explain that the number of people on regular continuing claims fell to 4.14 million in the last week of February, but the take-up for total federal unemployment benefit programs grew in the week of February 20.

“Initial jobless claims fell to 712K in the first week of March. This is spitting distance from the post-pandemic low of 711K set in November, but still higher than any reading before COVID, just as it has been in each of the past 51 weeks. The outturn was better than the 725K figure expected by the consensus, however.”

“Pandemic Emergency Unemployment Compensation (PEUC) offers an extension of unemployment benefits after the initial 13-week claims period is exhausted. Through the week of February 20, there were 5.5 million people filing continuing claims for these benefits.”

“The number of people getting unemployment checks from the federal government continues to grow even as regular state continuing claims figures fall.”

FXStreet reports that economists at Nordea note that the CNY is close to peaking as the Chinese growth cycle cools down and western economies open up in the coming months. In the short-term, capital inflows should offer some support for the CNY.

“After yuan’s strong performance the PBoC would likely welcome a pause in the appreciation trend and the central bank is in no rush to tighten monetary policy in 2021.” 

“In the very short-term, risks are still tilted towards slightly stronger CNY, as capital flows and macroeconomic momentum favours the CNY. However, In Q2 the US, followed by Europe, will open up and this should turn macro momentum to favour the USD and EUR, meaning CNY appreciation pressure should gradually fade.”

“The positive credit impulse has already reached its peak in China, which should be seen as a negative factor for the CNY, although this might be a story for the second half of the year. Short-term risks for the CNY include softness in the Chinese equity market, where the last couple of weeks have been volatile.”

“One could argue that continuous power struggle should be structurally negative for the CNY.”

U.S. job openings increase 2.4 percent in January; hires decline 2.0 percent

The Job Openings and Labor Turnover Survey (JOLTS) published by the Labor Department on Thursday revealed a 2.4 percent m-o-m gain in the U.S. job openings in January 2021 after a revised 0.2 percent m-o-m decrease in December 2020 (originally a 1.1 percent m-o-m advance).

According to the report, employers posted 6.917 million job openings in January compared to the December figure of 6.752 million (revised from 6.646 million in the original estimate) and economists’ expectations of 6.600 million. The job openings rate was 4.6 percent in January, up from an unrevised 4.5 percent in the prior month. The report showed that the number of job openings increased in state and local government education (+56,000), educational services (+21,000), and mining and logging (+10,000).

Meanwhile, the number of hires fell 2.0 percent m-o-m to 5.301 million in January from a revised 5.411 million in December. The hiring rate was 3.7 percent in January, down from a revised 3.8 percent in the prior month. Hires decreased in federal government (-15,000), but rose in arts, entertainment, and recreation (+59,000) and in educational services (+25,000).

The separation rate in January was 5.307 million or 3.7 percent, compared to 5.582 million or 3.9 percent in December. Within separations, the quits rate was 2.3 percent (-0.1 p.p. m-o-m), and the layoffs rate was 1.2 percent (-0.1 pp m-o-m).

• ECB sees 2021 GDP growth at 4.0% vs. 3.9% projected in December
• ECB sees 2022 GDP growth at 4.1% vs. 4.2% projected in December
• ECB sees 2023 GDP growth at 2.1% vs. 2.1% projected in December
• Notes mutations are the source of downside risk
• ECB sees 2021 HICP inflation at 1.5% vs. 1.0% projected in December
• ECB sees 2022 HICP inflation at 1.2% vs. 1.1% projected in December
• ECB sees 2023 HICP inflation at 1.4% vs. 1.4% projected in December
• Says long-term inflation expectations remain subdued

• PEPP pace change required Governing Council decision
• There was a total consensus on PEPP pace decision
• ECB is not operating mechanically
• Convenient to decide on PEPP pace on quarterly basis
• Governing Council not monitoring PEPP on weekly basis
• Don't expect big PEPP rise next Monday because there are still lots of redemptions and we're just starting to implement the decision today
• There's no reference to any kind of yield curve control; ECB is not doing yield curve control
• ECB will see through temporary inflation spikes
• It's possible that inflation will hit 2% by the end of 2021
• Not looking at any particular segment of yield curve
• ECB monitoring carefully exchange rate for inflation
• ECB not targeting exchange rate

U.S. stock-index futures rose on Thursday, as tech stocks joined the rebound rally amid continued downwards pressure on U.S. Treasury yields.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

FXStreet reports that analysts at Credit Suisse note that the S&P 500 maintains the break of its near-term downtrend, but with a move above 3929/34 still needed to suggest the consolidation/corrective phase is over and the core bull trend resumed.

“We suspect strength can extend further near-term, but we remain of the view a lengthy consolidation/corrective phase is still likely to be seen. Our broader base case remains though to view this consolidation as just a temporary pause in the core underlying uptrend.”

“The immediate risk stays seen higher in the range with resistance seen at 3917 initially, then 3929/34. Above here though is needed to suggest the consolidation phase may already be over for strength back to the 3950/51 high. Big picture, we continue to look for an eventual move above here to test 4070/75.”

Tesla (TSLA) initiated with a Buy at Mizuho; target $775

General Electric (GE) downgraded to Perform from Outperform at Oppenheimer

Chevron (CVX) upgraded to Buy from Hold at DZ Bank; target $124

• Says market rates pose risk to wider financing conditions
• Financing conditions include risk free rates, and corporate borrowing rates
• ECB will purchase flexibly and in response to market conditions
• ECB could increase PEPP pace or not use full envelop, depending on conditions
• Overal economic situation is expected to improve in 2021
• Uncertainty remains
• Persistently high COVID rates, lockdowns weigh on growth in the short term
• Containment measures are weighing on activity
• Incoming data points to continued economic weakness in Q1
  
• GDP to contract again in Q1
• Inflation to pick up mostly due to transitory factors
• Underlying price pressures remain subdued

The data from the Labor Department revealed on Thursday the number of applications for unemployment fell more than expected last week, but remain elevated, as the U.S. labor market struggles to recover from its biggest shock in history, caused by the COVID-19 pandemic.

According to the report, the initial claims for unemployment benefits decreased by 42,000 to 712,000 for the week ended March 6. This was the lowest reading since the week ended November 8. Still, claims remained well above the pre-pandemic levels.

Economists had expected 725,000 new claims last week.

Claims for the prior week were revised upwardly to 754,000 from the initial estimate of 745,000.

Meanwhile, the four-week moving average of jobless claims declined to 759,000 from an upwardly revised 793,000 in the previous week.

Continuing claims dropped to 4,144,000 from an upwardly revised 4,337,000 in the previous week.

EUR traded mixed against its major rivals in the European session on Thursday after the release of the European Central Bank’s (ECB) monetary policy statement, which, in general, provided little new information for market participants. The single European currency rose against USD, JPY and GBP, but fell against CHF, AUD, NZD and CAD.

At the March meeting, the ECB’s policymakers decided to take no action on interest rates or monetary stimulus, as widely expected. The Bank’s main refinancing rate, marginal lending facility rate and the deposit facility rate were left unchanged at  0.00 percent, 0.25 percent and -0.50 percent, respectively. The ECB’s officials also repeated their pledge to continue the purchases under pandemic emergency purchase program (PEPP) with a total envelope of EUR1,850 billion until at least end of March 2022. However, the policymakers added that it is expected “the purchases under the PEPP over the next quarter to be conducted at a significantly higher pace than during the first months of this year”. Moreover, it was noted that “if favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full. Equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation.” The Bank also repeated its promise to continue to provide ample liquidity through its refinancing operations (in particular, TLTRO III) as well as to continue purchases under the asset purchase program (APP) at a monthly pace of EUR20 billion.

The announced outcomes of the ECB’s latest meeting were in line with investors’ expectations. 

Market participants’ attention is now turning towards the press conference by the ECB’s President Christine Lagar (due at 13:30 GMT), during which she is expected to provide more clarity on the ECB’s signals of stepping up the PEPP purchases.

The European Central Bank (ECB) left its main refinancing rate unchanged at 0.00 percent on Thursday, as widely expected. Its interest rates on the marginal lending facility and the deposit facility were also left unchanged at 0.25 percent and -0.50 percent, respectively.

In its policy statement, the ECB said:

• Governing Council expects key ECB interest rates to remain at their present or lower levels until it has seen inflation outlook robustly converge to level sufficiently close to, but below, 2%;
• Governing Council will continue to conduct net asset purchases under pandemic emergency purchase programme (PEPP) with total envelope of EUR1,850 billion until at least end of March 2022;
• Governing Council expects purchases under PEPP over next quarter to be conducted at significantly higher pace than during first months of this year;
• Governing Council will purchase flexibly according to market conditions and with view to preventing tightening of financing conditions;
• PEPP envelope can be recalibrated if required to maintain favourable financing conditions;
• Governing Council will continue to reinvest the principal payments from maturing securities purchased under the PEPP until at least end of 2023;
• Net purchases under asset purchase programme (APP) will continue at monthly pace of EUR20 billion;
• Governing Council continues to expect monthly net asset purchases under the APP to run for as long as necessary and to end shortly before ECB starts raising its key interest rates;
• Governing Council also intends to continue reinvesting, in full, the principal payments from maturing securities purchased under APP for extended period of time;
• Governing Council will continue to provide ample liquidity through its refinancing operations
• Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry.

SCMP reports that the China Semiconductor Industry Association (CSIA), an association of 774 Chinese businesses in the chips industry, announced on Thursday that it had established a working group with the U.S. technology companies to create an avenue for communication on issues such as “export controls, supply chain security”.

According to a statement on the CSIA's website, the working group is aimed at promoting “deeper mutual understanding and trust” between the Chinese and U.S. semiconductor industries to solve concerns through dialogue and cooperation.

The Semiconductor Industry Association (SIA), which is located in Washington, is reported to be a counterpart of the Chinese association. However, the SIA hadn’t reported about the formation of the working group.

According to the Chinese association, the group, which will include 10 representatives from both sides, will conduct meetings every six months to keep each other updated about technology and will work out policy proposals.

FXStreet reports that economist at UOB Group Ho Woei Chen, CFA, assesses the latest inflation figures in the Chinese economy.

“China’s headline Consumer Price Index (CPI) remained in decline at -0.2% y/y in February (Bloomberg: -0.3%, Jan: -0.3%), again due to a high comparison base. Both food and non-food CPI fell by 0.2% y/y.”

“We expect the headline inflation to rebound back into positive from March as the high base effect wears off. For the full-year 2021, our forecast for CPI remains at 2.6% (2020: 2.5%), below the 3.0% target set by the National People’s Congress (NPC). Nonetheless, there is upside risk should the higher PPI be translated into consumer prices.”

“Producer Price Index (PPI) jumped sharply by 1.7% y/y in February (Bloomberg: 1.5%, Jan: 0.3%). We expect further pick-up in the PPI inflation from the low base last year and sustained commodity prices... After two preceding years of decline, we expect PPI to rebound to 4.0% this year (2020: -1.8%).”

“As China is a major part of the global supply chain, the strong rebound in PPI may further fuel concerns about the global inflation outlook. Nonetheless, it must be emphasized that China’s PPI is still being led by higher commodity prices while global demand will likely take longer to recover which thus supports the continuation of the current monetary policy stance this year.”

According to a diplomatic note seen by Bloomberg, further delays in the distribution of AstraZeneca's vaccine are possible as the manufacturer remains a problem. In addition, Johnson & Johnson, which is expected to get approval from the European Medicines Agency (EMA) on Thursday, has yet to provide a delivery schedule for its Covid vaccine. 

The diplomatic note also said that the EU member states remain concerned about the production and delivery of the vaccine, and a number of ambassadors called on the EU to strengthen its surveillance of delivery schedules and to keep governments in the loop on efforts to increase production capacity.

FXStreet reports that EUR/USD extends its defence of its rising 200-day moving average (DMA), currently seen at 1.1831 and the Credit Suisse analyst team sees scope for a deeper recovery from here still.

“EUR/USD extends its near-term recovery as expected after its fall to just ahead of our target of the rising 200-day average, currently seen at 1.1831. Although we see scope for recovery to extend further, this remains seen as a corrective bounce ahead of the risk turning lower again.” 

“Above 1.1933/47 should trigger a deeper intraday recovery to 1.1991, a price resistance, the 38.2% retracement of the fall from late February and 13-day exponential average. We look for this to then ideally cap and for the risk to turn lower again. Above 1.1991 though would suggest can extend further to 1.2039/54.” 

“Support is seen at 1.1882 initially, with a break below 1.1852 needed to suggest the bounce is over for a retest of 1.1835/31."

USD/CNH seen within a consolidative theme near-term - UOB

FXStreet reports that UOB Group’s FX Strategists see USD/CNH trading within the 6.4730-6.5360 range in the next weeks.

24-hour view: “Our expectation for USD to ‘trade between 6.5050 and 6.5400’ was incorrect as it fell to 6.4940. Despite the relatively sharp decline, downward momentum has not improved by much. However, there is room for USD to edge lower to 6.4870. Any weakness is not expected to challenge the next support at 6.4730. Resistance is at 6.5130 followed by 6.5280.”

Next 1-3 weeks: “USD subsequently breached 6.5000 as it fell to 6.4940. Upward momentum has dissipated and USD has likely moved into a consolidation phase. From here, USD could trade between 6.4730 and 6.5360 for a period of time.”

FXStreet notes that GBP/USD is bouncing higher near-term and Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, believes the cable may be ready to resume its up move.

“GBP/USD is seeing a small bounce higher – it has failed to maintain the break of its two-month uptrend (we have re-drawn it for now and it lies at 1.3827) and is currently underpinned by the 55-day ma at 1.3758.” 

“We are beginning to wonder if the market is ready to resume its up move and we are going to retry long positions? The six-month uptrend is not encountered until 1.3465.”

Reuters reports that Chinese Premier Li Keqiang defended the government's target for more than 6% economic growth this year, saying it is "not low", and policies would not be dramatically loosened to chase higher growth.

Li said the focus this year is on consolidating China's economic recovery, and setting hugely different growth targets from year to year would only "disturb" market expectations.

"Walking quickly for a moment does not mean one is walking steadily," Li said. "It is only with a steady pace that we will be firm in our steps."

Li warned against any "sharp turn" in policy making, and said that there would be no drop in efforts to secure people's livelihoods.

On the government's 2021 target to create more than 11 million urban jobs, Li said he hoped that goal could be exceeded even though pressure on employment remains significant.

China will also continue to open up to outside investment, including a push to open up its services sector, he said.

"We will deepen our opening up while boosting domestic demand through all efforts, and make China an important destination for foreign investment," he said.

eFXdata reports that Credit Suisse discusses EUR/GBP technical outlook.

"EURGBP extends its consolidation but with support at .8617 broken our broader bias stays bearish and post this consolidation we look for a retest of more important Fibonacci support, seen at .8520 – the 38.2% retracement of the entire 2015/2020 bull trend. Although a fresh hold here should be allowed for and an eventual break can see a move to the “measured top objective” at .8430 and eventually we think the key lows of 2019 and 2020 at .8281/39," CS notes.

FXStreet reports that strategists at Capital Economics don’t expect the price of gold to fall much further this year.

“We doubt that the recent rise in US real yields will continue, and we wouldn’t be surprised if they even edged back down a little. If we are correct, then the recent slump in investment demand should subside before long, helping to remove much of the downward pressure on gold.”

“We still expect the recovery in physical demand for gold to continue. A strong economic recovery in India and a revival in demand in China should act as a floor for the gold price.”

“We don’t think that the price of gold will drop too much further from here. We forecast it will end the year close to $1600 per ounce.”

Reuters reports that BNP Paribas said that the European Central Bank is likely to signal faster money printing on Thursday to keep a lid on borrowing costs but stop short of adding firepower to its already aggressive pandemic-fighting package.

The ECB cannot appear to micro-manage bond yields, since that would tie its hands in the future and invite accusations it is shielding governments from market forces.

The euro zone's central bank will also be keen not to overstate the rise in yields, which are still low by most standards. The German yield curve, the benchmark for the 19-country bloc, still in negative territory up to 20 years.

But having already committed to "maintaining favourable financing conditions", it cannot ignore even this modest rise in borrowing costs, as it has not been matched by improving economic prospects and mostly mirrors a move in U.S. Treasuries.

Another complication is that policymakers have already approved all the firepower needed to combat the rise in yields, so technically no new decision is required, since the bank still has a 1 trillion euro quota to buy bonds through next March.

But markets are now doubting the ECB's commitment. Purchase volumes have actually decreased in the past two weeks, confounding expectations it will use its much-emphasised "flexibility" to run up its bond-buying in line with a string of verbal warning from policymakers.

RTTNews reports that the Residential Market Survey from the Royal Institution of Chartered Surveyors, or RICS, showed that british house prices increased again in February but the current lockdown restrictions weighed on the sales market activity.

The house price balance rose to 52 percent in February from 49 percent in the previous month. Further, twelve month price expectations picked up, with the net balance climbing to +46 percent from +30 percent in January.

The net balance for new buyer enquiries came in at -9 percent in February versus -29 percent in January.

Looking ahead, near term sales expectations moved into marginally positive territory at +6 percent, marking the strongest reading for this series since October last year.

FXStreet reports that economists at ANZ Bank expect the NZD to strengthen this year.

“US core inflation data disappointed, but with the passage of the stimulus and the US economy reopening as vaccinations are rolled out at pace (the US has already administered 98M doses), USD weakness is becoming harder to automatically take for granted. 

The NZ story is a good one too, but other countries are now in line for their own reflation/recovery shocks. That speaks to near-term volatility rather than abandonment of our view of gradual NZD strength from here.”

Reuters reports that Swiss government said in its latest forecasts that Switzerland's economy will bounce back from its coronavirus-driven downturn to grow by 3% in 2021.

GDP will likely fall "significantly" in the first quarter of 2021 following the reintroduction of restrictions last December, the State Secretariat for Economic Affairs (SECO) said.

But the easing of public health measures, already under way with the reopening of shops, should lead to rapid recovery afterwards, it added.

Growing global demand would also boost Switzerland's export sector, while investment on production capacity will also increase, SECO said.

The Swiss economy contracted by 2.9% in 2020, its worst performance in more than 40 years, although the country avoided the deeper downturns in other countries by adopting a "lockdown light" approach which kept schools and many ski slopes open.

The expected recovery in 2021 - in line with SECO's December forecast - and will mean the Swiss economy returns to pre-crisis levels towards the end of the year, SECO said.

For 2022 SECO expects the economy to grow by 3.3%, up from its December forecast for a 3.1% increase.

CNBC reports that according to ING senior rates strategist Antoine Bouvet, the 10-year U.S. Treasury yield is likely to hit 2% by the end of the year but could spike “well above” that in the second quarter.

Bouvet told that the envisaged re-opening of the economy in the second quarter will result in strong retail sales on the back of the U.S. government’s stimulus package. 

All these factors will “contribute and conspire towards optimism in the market and then towards that spike in U.S. Treasurys,” Bouvet said, expecting yields to reach a “minimum” of 2%. 

The 10-year U.S. Treasury yield shot up from 1% since the end of January, amid concerns about rising inflation. These concerns have been compounded by fears that the U.S.  government’s $1.9 trillion fiscal relief package could stimulate the economy too quickly and cause a surge in prices. 

While Bouvet said a lot of that increase in inflation would be temporary, he said it would be interesting to see how the U.S. Federal Reserve reacts.

ING expected average inflation to reach 2.9% this year and stay at that level next year.

FXStreet reports that economists at Westpac said that EUR/USD pair may test 1.17-1.22 range support.

“The European Union economy is likely to be constrained until well into H2 21 while economies such as the UK and US, with more successful vaccine rollouts and slowing new cases will outpace the EU. The ECB’s updated economic projections may well highlight the impact with only a minor uplift to regional growth compared to uplifts in other major economies.” 

“ECB is likely to underscore its commitment to support the recovery and be flexible with its PEPP to avoid spread widening and excessive yield rises but is not likely to alter its policies otherwise.”

During today's Asian trading, the US dollar fell against the euro and the pound, but rose against the yen.

The dollar index lost momentum on the back of lower US Treasury yields following the weakening of inflation expectations in the US after the publication of data on consumer prices.

Consumer prices excluding food and energy costs (Core CPI) rose 1.3% year-on-year in February, the lowest pace since June 2020. The price increase slowed from 1.4% a month earlier, despite the fact that experts expected the January growth rate to continue.

Nevertheless, experts expect that the new $1.9 billion stimulus package will push the US economy to strong growth, which will support the dollar in the medium term.

The House of Representatives of the US Congress approved a package of measures to support the economy proposed by President Joe Biden, which was previously adopted by the Senate. Biden is expected to sign the bill on Friday.

The focus of traders ' attention on Thursday is the meeting of the European Central Bank (ECB). Experts believe that the ECB can increase the volume of asset repurchases, as well as extend the duration of the anti-crisis program Pandemic Emergency Purchase Program (PEPP). The 1.85 trillion euro program is currently expected to end in March 2022.

The ICE index, which tracks the dollar's performance against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), fell 0.12%.

EUR/USD

Resistance levels (open interest**, contracts)

$1.2064 (475)

$1.2037 (465)

$1.2014 (1151)

Price at time of writing this review: $1.1940

Support levels (open interest**, contracts):

$1.1883 (1354)

$1.1860 (2208)

$1.1833 (4702)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date April, 9 is 50261 contracts (according to data from March, 10) with the maximum number of contracts with strike price $1,1900 (4702);

GBP/USD

$1.4129 (423)

$1.4073 (503)

$1.4049 (717)

Price at time of writing this review: $1.3950

Support levels (open interest**, contracts):

$1.3838 (290)

$1.3814 (504)

$1.3788 (570)

Comments:

- Overall open interest on the CALL options with the expiration date April, 9 is 7519 contracts, with the maximum number of contracts with strike price $1,4100 (1230);

- Overall open interest on the PUT options with the expiration date April, 9 is 16925 contracts, with the maximum number of contracts with strike price $1,3200 (3386);

- The ratio of PUT/CALL was 2.25 versus 2.26 from the previous trading day according to data from March, 10

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

Bloomberg reports that BlackRock Inc. just delivered a double-barreled warning on the merits of holding traditional haven gold right now.

Bullion is proving to be a less effective hedge against moves in other assets, such as stocks, as well as inflation, according to Russ Koesterich, portfolio manager for BlackRock’s Global Allocation Fund. Moreover, gold faces headwinds should the recovery pick up pace, he warned.

Gold is “failing as an equity hedge,” Koesterich said, noting its positive relationship with risky assets was even stronger when compared with tech stocks. He added: “Gold’s ability to hedge against inflation has been somewhat exaggerated. While it is a reasonable store of value over the very long-term -- think centuries -- it is less reliable across most investment horizons.”

BlackRock says that right now gold isn’t working well as a hedge against either stock moves or inflation risks, although it was against the dollar.

“Absent a strong view on a declining dollar, I would own less gold,” Koesterich wrote, noting that the precious metal was still demonstrating a strong inverse relationship with the U.S. currency. “And for those investors still looking for a hedge, one word: cash.”

FXStreet reports that FX Strategists at UOB Group discuss USD/JPY prospects.

Next 1-3 weeks: “We have expected USD to move higher for more than a week now. In our latest narrative from yesterday (09 Mar), we held the view that ‘the outlook for USD is still clearly positive and the next level to focus on is at 109.85’. USD subsequently rose to a fresh high of 109.23 but the advance was short-lived as it fell sharply to an overnight low of 108.40. Rapid loss in shorter-term momentum has diminished the odds for further USD strength but only a break of 108.00 (no change in ‘strong support’ level) would indicate that 109.23 is the extent of the current positive phase in USD.”

Reuters reports that Bank of Japan data showed that Japan's wholesale prices fell at a slower pace in February for a third straight month, offering an encouraging sign a recent rebound in fuel costs and pick-up in domestic demand will ease deflationary pressures across the economy.

The 0.7% year-on-year drop in the corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, follows a 1.5% annual decrease in January.

Oil prices fell 6.3% in February from a year earlier, a much smaller drop than a 14.4% decline in January, reflecting global rises in commodity and fuel costs, the data showed.

Steel and wood goods also rose last month thanks to a gradual recovery in domestic demand. Domestic final goods prices, which loosely track the consumer price index, were off 0.1% from a year earlier, a much smaller pace of decline than a 0.8% drop in January.