Producer Prices Rise More Than Expected

The May headline PPI rose +.9% MoM (consensus +.6%), and +4.1% YoY (consensus +3.6%). The annual increase is the highest since rising at +4.9% last June. Core PPI inflation (excluding food and energy) rose +.2% MoM, as expected, but the first monthly increase in three months. The annual core PPI level did edge up to +1.6% YoY, after hitting a 2007 low of 1.5% in April.

Both crude and intermediate PPI prices rose in May. Crude goods rose +2% MoM in May after falling -1.5% MoM in April. Intermediated goods accelerated to +1.1% MoM from +.9% in April. Over the past year, intermediate goods prices have risen +3.7% YoY, and crude goods prices have increased by +11.5% YoY. Crude food prices have risen a substantial 31.2% YoY while crude energy prices have only increased by +.3% YoY. Core crude and intermediate prices both decelerated in May on lower metals prices.

As expected, energy prices continued to rise, growing by +4.1% MoM in May, with gasoline prices advancing +10.2% MoM. This was the largest monthly increase in gas prices since last November, when they rose +18.5%, and contrasts sharply with the -13% decline in January. Over the past year, gasoline prices have risen +13.9% as refinery problems continue to plague output growth. In contrast, food prices fell -.2% MoM, the first decline in over six months, as vegetable prices fell over 35% MoM. Over the past year, most categories have seen rising prices. The only categories seeing deflation versus a year ago are computers (-22.6% YoY), passenger cars (-2.6% YoY), and light trucks (-.4% YoY). Overall consumer goods prices rose +4.8% YoY and +1.2% MoM.

Tomorrow we have the release of the consumer price index, which is also expected to accelerate higher on a monthly basis, due to higher gas prices.

Initial jobless claims came in as expected at 311k.