Traders are watching two reports this week to see whether a whiff of inflation is creeping into the economy.
The PPI is expected to increase by 0.2 percent on the headline and by the same amount, when excluding food and energy. PPI rose 0.5 percent last month.
"I'm forecasting PPI to be unchanged. I do think we'll see a little bit of an acceleration in the CPI, up 0.3 percent," said Ward McCarthy, chief financial economist at Jefferies. "CPI has been suppressed because commodity prices have been flirting with deflation since the beginning of the year. That's changing. I think we could be entering a period where we get three or four months of CPI numbers that are feistier than we've had in a while."
McCarthy said the year-over-year change in April could be close to 2 percent, which is the Fed's inflation target though it measures inflation using the PCE.
While economists value the CPI more than the PPI, the Fed's inflation metric of choice is the PCE, or personal consumption expenditures index. Core PCE inflation was running at 1.2 percent on a year ago basis in March.
Deutsche Bank chief U.S. economist Joseph LaVorgna said the PPI will not be that informative but it does contain health care data, which is included in PCE.
"The health care data that goes into the core PCE is 20 percent of its weight, and data that's used in the PCE comes from the PPI."
LaVorgna said he is monitoring that component. "My guess is we're going to see medical prices stabilize and start to trend higher. The year-over-year rate of health care is only up 0.8 percent," he said.
Another area he is watching for price increases is apparel in the CPI. "The rent is the biggest single piece. The wild card in the CPI is apparel prices. They've been soft and they bounced back in March. Apparel is one of the most volatile components, and that could determine whether the surprise is to the upside or downside," he said.
Traders are watching inflation readings careful because it would be a trigger for Fed interest rate hikes.
"I think the Fed has set the message that it's the PCE, not the CPI, that they snap attention to and (New York Fed President) Bill Dudley said 2 percent is a target not a ceiling … I think the Fed will be tolerating of an acceleration for a period of time," McCarthy said.
What else to watch
—By CNBC's Patti Domm. Follow her on Twitter @pattidomm.