U.S. producer price index slows sequentially in May, rises slightly year-on-year

The U.S. producer price index for final demand remained the same in May, coming in line with market expectations and coming off a sizeable, widespread gain in April. Meanwhile, core PPI  also came in weak on the month, but the trend over the past year has been up. On a year-on-year basis, producer prices came in at 2.4 percent, rising from 2.5 percent recorded in April and above consensus expectations of 2.3 percent. On a sequential basis, the PPI was 0 percent, slowing from April’s 0.5 percent.

Goods prices fully retraced the gain seen in April, falling 0.5 percent sequentially as energy prices dropped 3 percent and wholesale food prices fell 0.2 percent. Services prices, which contribute around two-thirds to the overall index, was up 0.3 percent on the month and rose 2.1 percent year-on-year. This is the most rapid annual gain seen since December 2014.

The preferred measure of core PPI, which strips energy, food and trade services, dropped 0.1 percent on sequential basis. However, it continues to be at its most rapid pace on record. The pipeline price pressures also indicated certain signs of moderation in April as processed goods rose just 0.1 percent and unprocessed goods dropped 3 percent. The producer price index for personal consumption stayed flat, underpinning expectations for a modest May consumer inflation performance.