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Tech pricing dips slightly in March as broader PPI declines

Servers, storage and professional services all saw decreases in the U.S. government's latest inflation update. Will prices continue to drop or repeat last year's volatility?

The cost of servers, storage and professional services declined in March, with tech pricing following the general pattern of cooling wholesale goods and services price inflation.

Overall, the Producer Price Index (PPI) dropped 0.5% in March, according to the U.S. Bureau of Labor Statistics. That's the largest month-over-month drop in the index since April 2020. Producer prices increased 2.7% year over year in March, compared with an 11.7% rise in March 2022.

The apparent easing of inflation is the latest data point to consider in a varied economic outlook, which includes low unemployment amid high tech layoffs, a slight slowdown in hiring and an expected increase in enterprise IT spending.

IT commodities drop slightly

The host computer and server category has experienced volatility in recent months. Prices saw a period of decline between August and November 2022, only to increase in December and into the start of 2023. Prices, however, dropped 0.17% in March, according to government data.

The coming months will show whether the March PPI update reflects the beginning of a trend. Gartner has previously suggested that deteriorating semiconductor demand from consumer markets could also surface as a trend in servers, storage and networking this year -- a turn of events that could cut prices.

Computer storage device pricing, meanwhile, showed marginal declines in March. That decrease follows a 1.4% price decline in January and a leveling off in February.

March IT inflation update

Host computers and servers
Month-over-month PPI decrease: 0.17%
Year-over-year PPI decrease: 1.5%

Computer storage devices
Month-over-month PPI decrease: 0.06%
Year-over-year PPI increase: 1.5%

Professional services
Month-over-month PPI decrease: 0.06%
Year-over-year PPI increase: 8.7%

Professional services drop slightly

Professional services pricing also dropped slightly in March. Consulting fees had increased for much of 2022, as IT services companies increased rates to keep pace with rising employee compensation.

"We have seen over the past few years an increase in the rates," noted Paolo Juvara, chief digital transformation officer at Pure Storage. Product pricing, in contrast, has seen little pricing change, he added. Long-term contracts with suppliers mitigate the effects of inflation.

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