In May, the Producer Price Index (PPI) for final demand increased by 0.1% (seasonally adjusted), following declines in April and March, reports the U.S. Bureau of Labor Statistics. This increase was smaller than analysts’ expectations, which predicted a 0.2% increase. Over the past 12 months, the index rose 2.6%. The May rise was driven by a 0.1% increase in prices for final demand services, led by higher trade margins, particularly in machinery and vehicle wholesaling, despite declines in transportation and warehousing services. Final demand goods prices rose 0.2%, mainly due to gains in core goods, with notable increases in tobacco, gasoline, and coffee, while jet fuel prices fell sharply. Excluding food, energy, and trade services, core PPI also edged up 0.1% in May and rose 2.7% year-over-year. They write:
The Producer Price Index for final demand advanced 0.1 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices declined 0.2 percent in April and 0.1 percent in March. On an unadjusted basis, the index for final demand rose 2.6 percent for the 12 months ended in May.
The May increase in the index for final demand was led by prices for final demand services, which advanced 0.1 percent. The index for final demand goods rose 0.2 percent.
Prices for final demand less foods, energy, and trade services edged up 0.1 percent in May after falling 0.1 percent in April. For the 12 months ended in May, the index for final demand less foods, energy, and trade services increased 2.7 percent.
Final Demand
Final demand services: The index for final demand services inched up 0.1 percent in May following a 0.4-percent decrease in April. The advance is attributable to a 0.4-percent rise in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) In contrast, prices for final demand transportation and warehousing services declined 0.2 percent, while the index for final demand services less trade, transportation, and warehousing was unchanged.
Product detail: Leading the increase in prices for final demand services in May, margins for machinery and vehicle wholesaling jumped 2.9 percent. The indexes for traveler accommodation services; apparel, footwear, and accessories retailing; alcohol retailing; and system software publishing also moved higher. Conversely, prices for airline passenger services fell 1.1 percent. The indexes for furniture retailing; securities brokerage, dealing, investment advice, and related services; and portfolio management also decreased.
Final demand goods: Prices for final demand goods rose 0.2 percent in May after edging up 0.1 percent in April. Over 80 percent of the May advance can be traced to the index for final demand goods less foods and energy, which climbed 0.2 percent. Prices for final demand foods increased 0.1 percent, while the index for final demand energy was unchanged.
Product detail: Within the index for final demand goods in May, prices for tobacco products rose 0.9 percent. The indexes for gasoline, processed poultry, roasted coffee, residential natural gas, and oilseeds also increased. In contrast, prices for jet fuel declined 8.2 percent. The indexes for pork and for carbon steel scrap also fell.
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