A measure of wholesale prices fell unexpectedly in May, providing further evidence that inflation is falling.
The producer price index, a measure of the prices producers receive for their goods and services on the open market, fell 0.2% for the month, the Labor Department’s Bureau of Labor Statistics reported Thursday. That reversed a 0.5% rise in April and was up 0.1% compared to the Dow Jones estimate.
Excluding food, energy and trade services, the PPI was flat, compared with expectations for a 0.3% rise.
On an annual basis, overall PPI increased by 2.2%.
Stock market futures posted slight gains following the report, while Treasury yields fell. During morning trading, the Dow Jones Industrial Average lost about 260 points, while the S&P 500 and Nasdaq were little changed.
Markets have been hoping that easing inflation data will prompt the Federal Reserve to cut interest rates later this year. Although the Fed cut its forecast for cuts this year to a reduction of 0.25 percentage points in its decision released on Wednesday, markets are still hoping for two.
“May CPI and PPI data support our view that the Fed will cut its key interest rate later this year,” Bank of America economist Stephen Juneau said in a note. “We believe that recent inflation data significantly reduces the likelihood that the Fed will need to raise interest rates, and we believe that the labor market data suggests that the likelihood of rapid rate cuts is also low.”
The release comes a day after the BLS reported that the Consumer Price Index, a widely watched measure of inflation that measures what consumers actually pay for goods and services, was flat month-over-month.
From a wholesale perspective, the PPI was held back by a 0.8% decline in final demand goods prices, which was the largest decline since October 2023. Within the category, the energy index fell 4.8%. Food prices fell 0.1%.
On the services side, fuel and lubricants retail margins increased 12.2%, although this was partially offset by a 4.3% decline in airline passenger service prices.
The release comes a day after the Federal Reserve noted “modest further progress” in bringing inflation back to its 2% target, but not enough for the central bank to start cutting interest rates. The Fed has kept its key interest rate in a targeted range of 5.25% to 5.5% since July 2023 as it awaits further signs that inflation is heading back towards the central bank’s 2% target.
In other economic news, the Labor Department reported Thursday that initial unemployment insurance claims rose to 242,000 in the week ended June 8. This is the highest level since August 2023 and an increase of 13,000 compared to the previous period. Economists surveyed by Dow Jones had expected 225,000.
Current claims, which are a week backlogged, totaled 1.82 million, up 30,000 from the previous week.
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2024-06-13 15:10:56
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