The Producer Price Index in May decreased by 0.2% month on month

The US Bureau of Labor Statistics reported that the Producer Price Index (PPI) for final demand decreased by 0.2% month on month in May, after an increase of 0.5% in April and a decrease of 0.1% in March. Compared to the same period last year, the final demand producer price index as of May has increased by 2.2%.

The final demand for goods has significantly decreased

The final demand for commodity prices in May saw a significant 0.8% decline, the largest decline since October 2023. This decline was mainly driven by a 4.8% decrease in the final demand energy index, while the final demand food prices slightly decreased by 0.1%. It is worth noting that the final demand commodity index, excluding food and energy, increased by 0.3%.

The key driving factor is gasoline prices, which have significantly decreased by 7.1%, accounting for a significant proportion of the decline in final demand commodity prices. Other contributing factors include a decrease in the prices of diesel, eggs, electricity, jet fuels, and basic organic chemicals. On the contrary, cigarette prices have increased by 3.3%, while the prices of hay, hay seeds, oilseeds, and residual fuel have also increased.

Maintain stability in final demand services

The final demand for service prices remained unchanged in May, after an increase of 0.6% in April. In this category, the index of final demand for trade services and services other than trade, transportation, and warehousing increased by 0.2% and 0.1%, respectively. However, the final demand for transportation and warehousing services prices decreased by 1.4%.

The profit margin of fuel and lubricant retail increased by 12.2%. The retail prices of food and alcohol, outpatient care, automobiles and their components, clothing and accessories have increased. On the contrary, the prices of air passenger services have decreased by 4.3%, and prices have also decreased in wholesale machinery and vehicles, wholesale professional and commercial equipment, portfolio management, and cargo truck transportation.

Core PPI

The core PPI index (excluding food, energy, and trade services) remained stable in May after rising by 0.5% in April. In the past 12 months, the core PPI has risen by 3.2%.

Market impact

The decline in PPI, especially driven by low energy costs, suggests that inflationary pressures may have eased. This may affect market sentiment, and investors may expect decision-makers to adopt more lenient policies. However, the stability of the core PPI indicates that underlying price pressure still exists, which may suppress market expectations for significant changes in monetary policy.