US producer prices down unexpectedly in May
16 Jun 2014
US producer prices were down unexpectedly in May on a broad fall, indicating inflation pressures remained moderate, Reuters reported.
According to the US Labor Department, Friday, its producer price index (PPI) for final demand was down 0.2 per cent, slowing sharply from April's 0.6 per cent increase, its largest gain in 1-1/2 years.
The department, in a revamp of its PPI series at the start of the year, included services and construction. The series had become volatile due to big swings in prices received for trade services, which made it difficult to get a good read on inflation.
Wholesale prices had signalled some pick-up in inflation pressures in recent months, however Friday's report suggested that inflation at the factory gate remained tame.
In the 12 months through May, prices received by US farms, factories and refineries were up 2.0 per cent, moderating from 2.1 per cent gain in April.
Wholesale food prices retreated 0.2 per cent after increasing for four consecutive months, even as gasoline prices fell 0.9 per cent.
Prices received for services at the final demand level also retreated 0.2 per cent after a gain of 0.6 per cent in April.
Producer prices excluding food and energy were down 0.1 per cent in April after rising 0.5 per cent the previous month.
According to Bloomerg, the May dip, the first in three months, suggested pricing power was yet to materialise as the global economy was slow to accelerate.
Muted costs posed a problem for Federal Reserve policy makers, who had said they wanted inflation to increase closer to their 2 per cent goal, a sign they would keep interest rate low well into 2015.
''Producer price inflation is still fairly contained despite the big increases in the last few months,'' Omair Sharif, a US economist at RBS Securities Inc in Stamford, Connecticut, said in a research note.
Stock-index futures did not change much, erasing earlier losses and the contract on the Standard & Poor's 500 Index maturing in September increased less than 0.1 per cent to 1,924.2 at 9:02 am in New York.
The May PPI decrease comes after a 0.6 per cent gain the prior month.
Wholesale food expenses were down 0.2 per cent in May with the cost of pork falling 5.1 per cent, the most since April 2012.
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