DATA SNAP: Energy Prices Push PPI Higher; Core Contained
Last update: 6/14/2007 8:30:01 AM
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May Producer Price Index ! Consensus: !
! Overall: +0.6% !
Key Numbers: May Apr ! Core: +0.2% !
PPI Index: +0.9% +0.7% ! Actual: !
Core Index: +0.2% 0.0% ! Overall: +0.9% !
Intermediate: +1.1% +0.9% ! Core: +0.2% !
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By Brian Blackstone
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--U.S. wholesale prices rose sharply for a fourth-straight month in May on higher energy prices, but outside of volatile food and energy sectors prices remained largely contained, suggesting that while inflation remains a risk, it doesn't appear to be taking a significant hold in the economy.
The producer price index for finished goods rose 0.9% in May, the Labor Department said Thursday, up from an unrevised 0.7% gain in April.
The core PPI, which excludes food and energy, was up 0.2% after holding steady the previous two months.
May's headline number was slightly above expectations. The median forecast of 27 economists polled by Dow Jones Newswires was for an increase of 0.6% in the PPI and 0.2% in the core.
In the 12 months through May, wholesale prices rose 4.1%, the largest increase since June 2006. In contrast, the core PPI was up just 1.6% from a year ago.
The PPI report comes on the heels of a sharper-than-expected rise in May import prices. The key question is whether higher import and wholesale prices will seep into underlying consumer prices.
So far, they haven't. Annual inflation as measured by the core consumer price index and the Fed's preferred gauge, the core price index for personal consumption expenditures, have in recent months crept back down toward 2%, which is widely seen as the top edge of the Fed's comfort zone for inflation. In the case of core PCE, the index is now actually at 2%.
The government releases May CPI figures Friday and PCE price data later in the month.
The Fed is widely expected to hold the federal funds rate at 5.25% for an eighth-straight time dating back to last summer when it meets later this month and maintain its anti-inflation bias. Fed Chairman Ben Bernanke last week said that while there has been a "gradual ebbing" in core inflation, risks remain to the upside.
Financial markets have in recent days come to grips with the idea that the Fed probably won't lower rates this year, as once thought, amid signs of robust economic growth.
Thursday's PPI report showed producer prices for energy increased 4.1% last month compared to April. Gasoline prices soared 10.2%, the sharpest rise since November.
Food prices fell 0.2%, breaking a string of six-straight increases.
Wholesale prices of passenger cars fell 0.2%. Computer prices, meanwhile, tumbled 2%.
Deeper in the production pipeline, price pressures remained elevated. Prices of raw materials, known as crude goods, rose by 2%, while excluding food and energy they edged up 0.1%. Intermediate goods prices increased 1.1%, and were up 0.4% excluding food and energy.
-By Brian Blackstone; Dow Jones Newswires; 202-828-3397; brian.blackstone@dowjones.com
(END) Dow Jones Newswires
June 14, 2007 08:30 ET (12:30 GMT) |
