Producer Prices Miss, Plunge To Negative After April Surge

Tyler Durden's picture

After the surge in prices in April, May's Producer Prices fall 0.2% MoM (compoared to a +0.1% expectation). Year-over-year inflation rose 2.0% (down from last month's 2.1% and missing expectations of 2.4% significantly). This is the first MoM drop since Febuary for the headline and core numbers as it appears vehicle rental appeared to see prices implode. PPI Ex Food and Energy (core), saw prices rise at 2.0% - the fastest since May 2012.

The breakdown of the drop, first in services: Most of the decline in May is attributable to the index for final demand trade services, which fell 0.5 percent. And then by products:  The indexes for securities brokerage, dealing, investment advice, and related services; apparel, footwear, and accessories retailing; health, beauty care, and optical goods retailing; food wholesaling; and consumer loans (partial) also moved lower.

It appears that any hopes of "benign" inflation finally taking hold have to be postponed once more...

The breakdown in chart format:

And in detail:

Final demand services: Prices for final demand services moved down 0.2 percent in May, the first decrease since a 0.3-percent drop in February. Most of the decline in May is attributable to the index for final demand trade services, which fell 0.5 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing also moved lower, inching down 0.1 percent. In contrast, the index for final demand transportation and warehousing services climbed 0.9 percent.

 

Product detail: In May, a 1.1-percent decrease in margins for machinery and equipment wholesaling accounted for about half of the decline in prices for final demand services. The indexes for securities brokerage, dealing, investment advice, and related services; apparel, footwear, and accessories retailing; health, beauty care, and optical goods retailing; food wholesaling; and consumer loans (partial) also moved lower. Conversely, prices for truck transportation of freight increased 0.9 percent in May. The indexes for fuels and lubricants retailing and for legal services also advanced.

 

Final demand goods: The index for final demand goods fell 0.2 percent in May, the largest decrease since a 0.7-percent drop in April 2013. In May, prices for final demand energy and final demand foods both declined 0.2 percent. The index for final demand goods less foods and energy was unchanged.

 

Product detail: In May, gasoline prices fell 0.9 percent, accounting for about half of the decline in the final demand goods index. Prices for basic organic chemicals; pork; pharmaceutical preparations; residential electric power; and natural cheese, except cottage cheese also moved down. In contrast, the diesel fuel index rose 3.9 percent in May. Prices for processed poultry and cigarettes also advanced. Special grouping, Final demand less foods, energy, and trade: Prices for final demand less foods, energy, and trade services were unchanged in May, following advances of 0.3 percent in April and March. (The index for final demand less foods, energy, and trade services represents about two-thirds of final demand.)

 

Special grouping, Finished goods: Prices for finished goods edged down 0.1 percent in May. (The finished goods index represents about two-thirds of final demand goods, through the exclusion of the weight for government purchases and exports. The finished goods index represents about one-quarter of overall final demand.) This decrease was led by prices for finished consumer energy goods, which fell 0.3 percent. The index for finished consumer foods declined 0.1 percent. Conversely, prices for finished goods less foods and energy advanced 0.1 percent. Within finished goods, falling prices for gasoline; pork; pharmaceutical preparations; residential electric power; and natural cheese, except cottage cheese outweighed higher prices for cigarettes, processed poultry, diesel fuel, and passenger cars.

Source: BLS