U.S. underlying producer prices increase solidly in May
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[June 11, 2019] WASHINGTON
(Reuters) - U.S. producer prices increased solidly for a second straight
month in May, boosted by a surge in the cost of hotel accommodation and
gains in a range of other services, pointing to a steady pickup in
underlying inflation pressures.
The Labor Department said on Tuesday producer prices excluding food,
energy and trade services rose 0.4% last month, matching April's gain.
The so-called core PPI increased 2.3% in the 12 months through May after
rising 2.2% in April.
Weaker energy and food prices, however, partially offset the increase in
services last month. That led to the producer price index for final
demand to edge up 0.1% in May after gaining 0.2% in April. In the 12
months through May, the PPI climbed 1.8%, slowing from April's 2.2%
Economists polled by Reuters had forecast the PPI would nudge up 0.1% in
May and rise 2.0% on a year-on-year basis.
The steady rise in underlying producer prices likely supports the
Federal Reserve's view that the weak inflation readings are probably
The Fed's preferred inflation measure, the core personal consumption
expenditures (PCE) price index, increased 1.6 percent in the year to
April after gaining 1.5% in March.
An escalation in trade tensions, slowing growth and a sharp step-down in
hiring in May led financial markets to price in at least two interest
rate cuts from the Fed by the end of the year.
Fed Chairman Jerome Powell said last week that the U.S. central bank was
closely monitoring the implications of the trade tensions on the economy
and would "act as appropriate to sustain the expansion." Fed
policymakers are, however, expected to keep rates unchanged when they
meet on June 18-19.
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Shoppers carry bags of purchased merchandise at the King of Prussia
Mall, United States' largest retail shopping space, in King of
Prussia, Pennsylvania, U.S., December 8, 2018. REUTERS/Mark Makela
In May, wholesale energy prices fell 1.0% in May after rising 1.8% in the prior
month. Goods prices slipped 0.2% last month after gaining 0.3% in April.
Wholesale food prices dropped 0.3% in May. Core goods prices were unchanged for
a second straight month. Prices for hotel accommodation surged 10.1% in May, the
most since April 2009. That accounted for nearly 80 percent of the increase in
services prices last month. Services prices rose 0.3% after gaining 0.1% in
The cost of healthcare services increased 0.2% last month after increasing 0.3%
in April. Those healthcare costs feed into the core PCE price index. There were
also increases in prices for passenger transportation and portfolio management.
(Reporting by Lucia Mutikani Editing by Paul Simao)
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