U.S. producer prices rose modestly in May, rebounding from April’s decline, as higher costs for final demand services—particularly lodging—helped offset a drop in airfares.
The Producer Price Index (PPI) for final demand increased by 0.1% month-over-month, following a 0.2% decrease in April. Economists had forecast a slightly stronger gain of 0.2%.
On an annual basis, PPI rose 2.6% in May, in line with expectations and a slight acceleration from April’s 2.5% increase.
The increase in services costs was driven largely by higher prices for hotel accommodations, while airfares declined 1.1% and portfolio management fees also fell. These components play a key role in a broader inflation metric closely watched by Federal Reserve policymakers.
Excluding volatile items like food, energy, and trade services, core PPI also ticked up by 0.1% after falling 0.1% in April. The year-over-year core figure eased to 2.7% from 2.9%.
These producer price data follow a similarly soft report on consumer inflation. The Consumer Price Index (CPI), released Wednesday, rose 2.4% year-over-year in May, slightly above April’s 2.3% but below the anticipated 2.5%. On a monthly basis, CPI growth slowed to 0.1%, missing expectations for a repeat of April’s 0.2% rise.
Shelter costs were the main driver of CPI growth in May, while energy prices fell by 1%, pulled down by lower gasoline costs, according to the Bureau of Labor Statistics.
“This marks the second consecutive day of subdued inflation readings, likely to put downward pressure on the dollar and support U.S. Treasuries,” analysts at Vital Knowledge wrote.
They also noted that while the Federal Reserve is widely expected to hold rates steady at its upcoming June 18 meeting, the recent data could influence the Fed’s forward guidance to take a slightly more dovish tone.
