A report released by the Labor Department on Thursday showed a much bigger than expected increase in U.S. producer prices in the month of May.
The Labor Department said its producer price index for final demand climbed by 0.4 percent in May after tumbling by 1.3 percent in April. Economists had expected the index to inch up by just 0.1 percent.
The bigger than expected increase in producer prices was partly due to a spike in food prices, which surged up by 6.0 percent in May after falling by 0.5 percent in April.
Energy prices also showed a substantial rebound, jumping by 4.5 percent in May after plummeting by 19.0 percent in the previous month.
Excluding food and energy prices, core producer prices edged down by 0.1 percent in May after falling by 0.3 percent in April. The dip in core prices matched economist estimates.
The modest decrease in core prices came as prices for services edged down by 0.2 percent for the second consecutive month.
Prices for trade services declined by 0.8 percent, more than offsetting a 1.5 percent jump in prices for transportation and warehousing services. Prices for other services were unchanged.
Compared to the same month a year ago, producers prices in May were down by 0.8 percent, reflecting a smaller decrease compared to the 1.2 percent slump in April.
Meanwhile, the report said the annual rate of growth in core producer prices slowed to 0.3 percent in May from 0.6 percent in April.
“With the demand shock from the pandemic looking to have stabilized, price dynamics should slowly normalize in coming months,” said a note from economists at Oxford Economics.
They added, “But the expected gradual recovery in demand, along with a strong dollar and depressed oil prices will keep a lid on price inflation for months to come.”
The Labor Department released a separate report on Wednesday showing a modest decrease in consumer prices in the month of May.
The report said the consumer price index edged down by 0.1 percent in May after slumping by 0.8 percent in April. Economists had expected consumer prices to come in unchanged.
Excluding food and energy prices, core consumer prices also slipped by 0.1 percent in May after falling by 0.4 percent in April. Core prices were also expected to come in unchanged.
Compared to the same month a year ago, consumer prices in May were up by just 0.1 percent following the 0.3 percent increase in April.
The annual rate of growth in core consumer prices also slowed to 1.2 percent in May from 1.4 percent in April.
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