PPI in May was flat m/o/m as expected after rising by .5% in April. The core rate jumped .3% after a .4% rise in April and that was 2 tenths more than expected. Looking y/o/y puts headline PPI up by 2.4% and the core rate higher by 2.1%. That core rate matches a 5 yr high. The story remains the same in that we have goods deflation and services inflation. Goods prices fell by .5% but it was all energy as core goods prices rose by .1%. Services inflation was higher by .3% m/o/m led by trade services which the BLS defines as “changes in margins received by wholesalers and retailers). Half of this gain was due to wider margins on fuels and lubricants retailing. This core rate ex trade saw prices down by .1%. Of note, prices for transportation and warehousing services were down by .5%. We can explain this by looking at the sharp inventory drawdowns seen year to date.
Prices in the pipeline (intermediate stage of production) were benign with prices for processed goods up by .1% m/o/m while unprocessed goods prices down by 3% while services prices were unchanged.
Bottom line, this number is never market moving as CPI is always more of a focus which we will see tomorrow. Wholesale prices at the headline level should start to fall in coming months due to the drop in energy prices but we now have a new thing to watch and that is higher food prices. See chart for the CRB Food stuff index. Also as mentioned, goods prices are in disinflation/deflation as always while services inflation is always sticky with the degree the only question.