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US wholesale prices shrank more than expected in May, according to data released Wednesday by the Labor Department, due largely to a steep drop-off in energy demand. news online
The decline in the producer price index (PPI) provides further evidence of slowing inflation, giving the Federal Reserve another data point to mull over as it weighs the prospect of a further interest rate hike.
The US central bank is set to announce later Wednesday if it will move ahead with an 11th straight rate increase to control above-target inflation.
But most analysts expect it to skip a rate hike this time to give policymakers more time to assess the health of the US economy.
The PPI dropped by 0.3 percent last month, the Labor department said, after recording a small increase in April.
Sixty percent of the decline in final demand goods “can be traced to a 13.8-percent drop in prices for gasoline,” the report added.
The department noted that the indexes for diesel fuel, chicken eggs, jet fuel, fresh and dry vegetables, as well as iron and steel scrap also fell.
Final demand services advanced by 0.2 percent in May, with more than 40 percent of the increase attributed to “margins for automobiles and automobile parts retailing, which rose 4.2 percent,” the report said.
“Goods inflation is now negative, and services inflation resumed its downward trend in May,” said economist Matthew Martin of Oxford Economics in a note.
Along with consumer inflation data released a day earlier, “the report supports our call for the Fed to pause rate hikes at today’s meeting and to keep rates on hold through year end,” he added.
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economy news online
U.S. Bureau op Labor Statistics
Producer Price Index News Release summary May 2023
The Producer Price Index for final demand declined 0.3 percent in May, seasonally adjusted, the
U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.2 percent in April and
fell 0.4 percent in March. (See table A.) On an unadjusted basis, the index for final demand
moved up 1.1 percent for the 12 months ended in May.
In May, the decline in the final demand index can be traced to prices for final demand goods,
which fell 1.6 percent. The index for final demand services increased 0.2 percent.
Prices for final demand less foods, energy, and trade services were unchanged in May after
inching up 0.1 percent in April. For the 12 months ended in May, the index for final demand less
foods, energy, and trade services increased 2.8 percent.
Final Demand
Final demand goods: Prices for final demand goods moved down 1.6 percent in May, the largest
decrease since falling 1.6 percent in July 2022. Most of the May decline is attributable to the index
for final demand energy, which dropped 6.8 percent. Prices for final demand foods moved down 1.3
percent. In contrast, the index for final demand goods less foods and energy increased 0.1 percent.
Product detail: Sixty percent of the May decline in the index for final demand goods can be traced to
a 13.8-percent drop in prices for gasoline. The indexes for diesel fuel, chicken eggs, jet fuel, fresh
and dry vegetables, and iron and steel scrap also fell. Conversely, prices for tobacco products
advanced 1.7 percent. The indexes for electric power and for beverages and beverage materials also
increased. (See table 2.)
Final demand services: The index for final demand services moved up 0.2 percent in May following
a 0.3- percent advance in April. Leading the May increase, margins for final demand trade services
rose 1.0 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.)
Prices for final demand services less trade, transportation, and warehousing edged up 0.1 percent. In
contrast, the index for final demand transportation and warehousing services declined 1.4 percent.
Product detail: Over 40 percent of the May increase in prices for final demand services can be
attributed to margins for automobiles and automobile parts retailing, which rose 4.2 percent. The
indexes for fuels and lubricants retailing; apparel, footwear, and accessories retailing; securities
brokerage, dealing, investment advice, and related services; machinery and vehicle wholesaling; and
food wholesaling also advanced. Conversely, prices for truck transportation of freight fell 2.1
percent. The indexes for portfolio management and for health, beauty, and optical goods retailing
also decreased.
Intermediate Demand by Commodity Type
Within intermediate demand in May, the index for processed goods fell 1.5 percent, prices for
unprocessed goods dropped 4.8 percent, and the index for services advanced 0.2 percent. (See tables
B and C.)
Processed goods for intermediate demand: Prices for processed goods for intermediate demand
moved down 1.5 percent in May, the largest decrease since falling 2.5 percent in December 2022.
Most of the May decline can be traced to a 6.9-percent drop in the index for processed energy goods.
Prices for processed foods and feeds decreased 1.9 percent, while the index for processed materials
less foods and energy was unchanged. For the 12 months ended in May, prices for processed goods
for intermediate demand fell 7.1 percent, the largest 12-month decline since moving down 7.2
percent in May 2020.
Product detail: In May, over 40 percent of the decrease in prices for processed goods for
intermediate demand can be traced to the index for diesel fuel, which dropped 13.7 percent. Prices
for gasoline, natural gas to electric utilities, jet fuel, primary basic organic chemicals, and prepared
animal feeds also fell. Conversely, the index for commercial electric power rose 1.8 percent. Prices
for cold rolled steel sheet and strip and for snack chips also advanced.
Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate
demand fell 4.8 percent in May after increasing 1.6 percent in April. Almost 60 percent of the broad-
based decrease is attributable to a 7.8-percent drop in prices for unprocessed energy materials. The
indexes for unprocessed foodstuffs and feedstuffs and for unprocessed nonfood materials less energy
also moved lower, falling 3.0 percent and 3.3 percent, respectively. For the 12 months ended in May,
prices for unprocessed goods for intermediate demand declined 27.5 percent, the largest 12-month
decrease since dropping 28.6 percent in April 2020.
Product detail: Nearly 60 percent of the May decline in the index for unprocessed goods for
intermediate demand can be traced to prices for crude petroleum, which fell 10.2 percent. The
indexes for ungraded chicken eggs, corn, iron and steel scrap, slaughter hogs, and natural gas also
moved lower. In contrast, raw milk prices increased 4.8 percent. The indexes for coal and for
aluminum base scrap also moved higher.
Services for intermediate demand: The index for services for intermediate demand advanced 0.2
percent in May after moving up 0.7 percent in April. A major factor in the May increase was a 0.4-
percent rise in prices for services less trade, transportation, and warehousing for intermediate
demand. Margins for trade services for intermediate demand advanced 0.2 percent. Conversely, the
index for transportation and warehousing services for intermediate demand decreased 0.9 percent.
For the 12 months ended in May, prices for services for intermediate demand increased 3.9 percent.
Product detail: Leading the May advance in the index for services for intermediate demand, prices
for business loans (partial) rose 3.2 percent. The indexes for securities brokerage, dealing, investment
advice, and related services; food wholesaling; fuels and lubricants retailing; investment banking;
and ground courier and messenger services also moved higher. In contrast, prices for truck
transportation of freight fell 2.1 percent. The indexes for portfolio management and for machinery
and equipment parts and supplies wholesaling also declined.
Intermediate Demand by Production Flow
Stage 4 intermediate demand: Prices for stage 4 intermediate demand decreased 0.2 percent in May
after increasing 0.4 percent in April. In May, the index for total goods inputs to stage 4 intermediate
demand moved down 0.6 percent. Conversely, prices for total services inputs edged up 0.1 percent.
(See table D.) Decreases in the indexes for gasoline; diesel fuel; portfolio management; machinery
and equipment parts and supplies wholesaling; warehousing, storage, and related services; and grains
outweighed rising prices for securities brokerage, dealing, investment advice, and related services;
business loans (partial); and commercial electric power. For the 12 months ended in May, the index
for stage 4 intermediate demand advanced 1.5 percent.
Stage 3 intermediate demand: The index for stage 3 intermediate demand declined 1.0 percent in
May, the fourth consecutive decrease. In May, prices for total goods inputs to stage 3 intermediate
demand fell 2.4 percent. In contrast, the index for total services inputs inched up 0.1 percent.
Declines in prices for diesel fuel; ungraded chicken eggs; jet fuel; grains; gasoline; and warehousing,
storage, and related services outweighed increases in the indexes for business loans (partial), raw
milk, and asphalt. For the 12 months ended in May, prices for stage 3 intermediate demand fell 6.5
percent, the largest 12-month decrease since dropping 8.1 percent in May 2020.
Stage 2 intermediate demand: The index for stage 2 intermediate demand declined 1.4 percent in
May after rising 1.3 percent in April. In May, prices for total goods inputs to stage 2 intermediate
demand moved down 4.0 percent. Conversely, the index for total services inputs advanced 0.6
percent. Falling prices for crude petroleum, gas fuels, iron and steel scrap, prepared animal feeds,
broadcast and network television advertising time sales, and primary basic organic chemicals
outweighed increases in the indexes for business loans (partial), fuels and lubricants retailing, and
coal. For the 12 months ended in May, prices for stage 2 intermediate demand decreased 9.8 percent,
the largest 12-month decline since dropping 10.3 percent in April 2020.
Stage 1 intermediate demand: The index for stage 1 intermediate demand declined 0.9 percent in
May, the largest decrease since moving down 1.8 percent in December 2022. In May, prices for total
goods inputs to stage 1 intermediate demand fell 1.8 percent, while the index for total services inputs
was unchanged. Decreasing prices for diesel fuel, gasoline, natural gas to electric utilities, grains,
iron and steel scrap, and truck transportation of freight outweighed advances in the indexes for
securities brokerage, dealing, investment advice, and related services; residual fuels; and commercial
electric power. For the 12 months ended in May, prices for stage 1 intermediate demand declined 3.6
percent, the largest 12-month decrease since dropping 4.5 percent in July 2020.
