Producer Prices Rise 0.1 Percent in May
Thursday June 14, 9:59 am Eastern Time
By Joanne Morrison
<<WASHINGTON (Reuters) - U.S. inflation at the wholesale level was tame in May, offering reassuring news for Federal Reserve policymakers who will meet later this month to consider whether to cut interest rates further.
The Labor Department said on Thursday that its Producer Price Index, measuring prices paid to businesses for ready-to-sell goods such as clothing and gasoline, inched up 0.1 percent last month after a 0.3 percent rise in April.
Food prices fell 0.4 percent in May after a 0.6 percent rise in April, while energy prices rose a slight 0.2 percent in the latest month after inching up 0.1 percent.
Stripping out volatile food and energy prices, the so-called core PPI rose 0.2 percent in May after a matching 0.2 percent gain April.
``I think it basically supports recent comments (from Fed officials) that inflation doesn't remain a concern,'' said James Glassman, senior economist at J.P. Morgan Chase.
May's rise in wholesale prices was more modest than expected. Wall Street analysts, on average, projected a 0.3 percent gain in the PPI and a 0.1 percent rise in the core.
``The surprisingly modest rise in producer prices makes it clear that inflation is not a growing threat,'' said Joel Naroff, president and chief economist at Naroff Economic Advisors Inc.
Fed policymakers, who will hold a regular scheduled meeting on June 26 and 27, are expected to cut interest rates for a sixth time this year to help boost the struggling U.S. economy. So far this year, the Fed has cut short-term rates a total of 2-1/2 percentage points and many economists expect the central bank to lower them by an additional 0.25 point in June.
Inflation is not likely to be a concern.
So far this year, inflation at the wholesale level was running at a 3.8 percent seasonally adjusted annualized rate and at 1.8 percent for the core rate, the Labor Department said. That compares to 3.6 percent in the overall PPI and 1.3 percent in the core rate for all of 2000.
``Fed officials have been telling us that they're still worried about the economy near-term and if inflation's a problem, it's more of a longer-term problem,'' said Marty Mauro, vice president and senior economist at Merrill Lynch in New York.
Blue chips in the Dow Jones Industrial Average in early morning trading dropped more than 100 points while the NASDAQ fell more than 35 points.
Although the energy component of the May PPI was contained overall, there was a huge 8 percent spike in heating oil prices. That was the biggest increase since an 11.6 percent rise in September 2000. Gasoline prices rose 0.4 percent in May while residential electric power increased 0.7 percent.
A separate Labor Department report on Thursday showed the number of Americans seeking first-time unemployment benefits fell by 12,000 to 428,000 for the week ended June 9, which was closely in line with Wall Street expectations of a decline to 422,000 claims.
However, the four-week moving average of jobless claims, considered a more reliable barometer of employment conditions because it irons out weekly gyrations, rose to 424,500. That was the highest level in almost nine years and pointed to further weakening in the labor market as the world's richest economy struggles to climb out of its slowdown.>> |
