While inflationary pressures remain relativel nascent, today’s Producer Price Index data for May suggests The Fed may face some more pressure soon. Final Demand rose 0.4% MoM, more than expected and the highest since May 2015. However, core PPI (ex food and energy) rose 1.2% YoY (higher than expected) – the most since January 2015. The main driver of PPI in May was a 2.8% surge in energy prices (in particular a 6.6% spike in gasoline prices). The last 3 months have seen the biggest rise in PPI gasoline since Aug 09.
The index for final demand goods rose 0.7 percent in May, the largest advance since a 1.2-percent jump in May 2015. Two-thirds of the May 2016 increase can be traced to prices for final demand energy, which climbed 2.8 percent. The indexes for final demand goods less foods and energy and for final demand foods both moved up 0.3 percent. Over one-third of the increase in the index for final demand goods is attributable to gasoline prices, which advanced 6.6 percent.
The index for final demand services rose 0.2 percent in May after inching up 0.1 percent in April. The May increase can be traced to margins for final demand trade services, which advanced 1.2 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, prices for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services fell 0.2 percent and 0.6 percent, respectively
Charts: Bloomberg
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