[1/2] People shop at a supermarket as inflation affects consumer prices June 10, 2022 in Manhattan, New York City, USA.Reuters/Andrew Kelly
WASHINGTON (Reuters) – U.S. producer prices fell more than expected in May on lower costs for energy products and food, easing inflationary pressures across the economy and ultimately giving consumers peace of mind. showed that it is possible to give
A report released Wednesday by the Labor Department also showed last month’s slowest annual rise in producer inflation in nearly two-and-a-half years. Underlying producer prices were subdued. Consumer prices rose modestly in May, following Tuesday’s data showing the lowest year-on-year rate of increase since March 2021.
The U.S. Federal Reserve (Fed) on Wednesday kept interest rates unchanged for the first time since March 2022, when the central bank embarked on its fastest monetary policy tightening in more than 40 years.
The Fed, which has raised its policy rate by 500 basis points in this tightening cycle, said in new economic forecasts that borrowing costs are likely to rise by another half a percentage point by the end of the year, especially due to economic resilience. suggested. labor market.
“There aren’t many factory price hikes planned to ambush consumers, and they’re a relief to inflation-weary Americans,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
“Inflation’s devastating blow to the economy is not over yet, but it is clear that there will come a day when inflation will fall to more manageable levels after the demand surge caused by the pandemic has completely dissipated.”
The final demand producer price index fell 0.3% last month after rising 0.2% before the revision in April. PPI has declined in three of the last five months. The 1.6% decline in commodity prices, the biggest drop since July last year, accounted for most of the PPI decline.
Commodity prices, which rose 0.2% in April, fell last month as energy prices fell 6.8%. Gasoline prices plummeted by 13.8%, accounting for 60% of the price drop. Food prices fell 1.3%, falling for the second month in a row, as prices of eggs and vegetables fell.
Food prices have fallen to levels seen before Russia’s February 2022 invasion of Ukraine.
Service costs rose 0.2 percentage points after rising 0.3 percentage points in April due to margins at auto and parts retail. Fuel and lubricant retailers and apparel, footwear and accessories retailers also increased.
Fees for securities brokerage, dealing, investment advice and related services increased. However, freight transport costs by road fell by 2.1% and portfolio management fees fell by 2.9%. Airfares fell 1.1%.
These service factors feed into the calculation of the Personal Consumption Expenditure (PCE) Price Index, the inflation indicator the Fed tracks towards its 2% target.
The PPI rose 1.1% in the 12 months to May. The year-on-year rate of increase was the lowest since December 2020, following a 2.3% gain in April.
Inflation is easing as supply chain bottlenecks are removed and demand for commodities slows amid higher borrowing costs. Last year’s price spike is also being excluded from annual inflation calculations.
Economists polled by Reuters expected the PPI to fall 0.1% from the previous month and rise 1.5% from a year earlier.
economic resilience
Wall Street stocks fell on the Fed’s interest rate decision and outlook. The dollar offset losses against a basket of currencies. US short-term Treasury yields rose.
So-called core goods prices, which exclude the volatile food and energy components, rose 0.1% last month, matching April’s gains. This supports expectations that the economy could experience a period of consumer goods disinflation, if not outright deflation. But some economists were skeptical.
“We will continue to monitor core goods prices for signs that easing input costs are being passed on to lower prices, but consumers are becoming accustomed to higher price levels,” said Veronica Clarke, an economist at Citigroup in New York. Therefore, it may be less likely,” he said. .
The narrower core PPI, which excludes food, energy and trade services components, was unchanged after rising 0.1% in April. Core PPI rose 2.8% in the 12 months to May, the smallest rise since February 2021, following a 3.3% rise in April.
Based on CPI and PPI data, economists estimated that the core PCE price index would rise 0.3% in May after rising 0.4% in April. The core PCE price index was expected to rise 4.6% year-on-year in May after rising 4.7% in April.
Data will be published at the end of the month. Fed officials on Wednesday raised their core PCE inflation forecast for this year to 3.9% from 3.6% in March.
“Inflation has moderated somewhat since the middle of last year,” Fed Chairman Powell told reporters. “Nevertheless, inflationary pressures remain high and the process of returning inflation to 2% continues.”
Reported by Lucia Mutikani.Editing: Chizu Nomiyama, Andrea Ricci
Our criteria: Thomson Reuters Trust Principles.
