So much for continued disinflation: moments ago the PPI headline [4]number came out at the highest level since February, or 0.5%, well above the expected 0.1% and up significantly from the -0.7% in April. The core PPI ex-food (which rose 0.6%) and energy (increasing 1.3% in May, the highest since February) rose a far more manageable 0.1% in May, and just 1.7% Y/Y, below the statutory accepted 2% annual growth on both the producer and consumer side: a break down of just which finished products led to this increase (gasoline, eggs and imitation cheese as it turns out) is provided below. Luckily, since nobody in the US either eats or uses energy (because they are such a "small component" of the hedonically-adjusted purse), nobody will mind when companies have no option but to pass through rising input costs to consumers.
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A quick snapshot at the input part of the production pathway: crude goods.
Crude energy: The index for crude energy materials moved up 5.0 percent in May. From February to May, prices for crude energy materials decreased 0.4 percent compared with a 7.4-percent rise from November to February. In May, nearly sixty percent of the monthly broad-based advance is attributable to the crude petroleum index, which rose 5.5 percent. Increases of 6.9 percent for natural gas prices and 1.0 percent for the coal index also contributed to the higher crude energy prices.
Crude foods: The index for crude foodstuffs and feedstuffs increased 2.1 percent in May. For the 3 months ended in May, crude foods prices rose 1.3 percent after falling 2.0 percent in the previous 3-month period. Accounting for half of the monthly advance in May, grain prices jumped 5.7 percent. An increase in the index for soybeans also was a factor in higher crude foods prices.
Crude core: The index for crude nonfood materials less energy fell 2.3 percent in May. From February to May, crude core prices dropped 4.1 percent compared with a 0.5-percent decline for the 3 months ended in February. Over sixty percent of the monthly decrease in May is attributable to the index for carbon steel scrap, which fell 6.3 percent.
And the headline-driving finished goods:
In May, over sixty percent of the broad-based rise in finished goods prices is attributable to the index for finished energy goods, which advanced 1.3 percent. Also contributing to the increase in finished goods prices, the index for finished consumer foods rose 0.6 percent and prices for finished goods less foods and energy moved up 0.1 percent.
Finished energy: The index for finished energy goods moved up 1.3 percent in May following two consecutive declines. A 1.5-percent rise in the index for gasoline accounted for forty percent of the May increase. Higher prices for residential natural gas and residential electric power also were factors in the advance in the finished energy goods index.
Finished foods: The index for finished consumer foods climbed 0.6 percent in May after falling 0.8 percent in the prior month. Accounting for over sixty percent of the increase, prices for eggs for fresh use surged 41.6 percent. A rise in the index for natural, processed, and imitation cheese also contributed to the advance in the finished consumer foods index.
Finished core: In May, prices for finished goods less foods and energy moved up 0.1 percent, the seventh consecutive increase. Nearly two-thirds of the May advance can be traced to prices for light motor trucks, which rose 0.4 percent.
In other words, the Fed's monetary transmission mechanism made it to gas, eggs and imitation cheese. All other products, not so much.