May PPI

Updated 16-Jun-09 09:11 ET

Highlights

The core rate for May PPI was -0.1%. The total PPI was up 0.2%. Both were less inflationary than expected.
The core rate fell 0.1% after rising 0.1% in April and being unchanged in March. It is thus net zero over the past three months. The core rate is now up 3.0% over the past year.
The total increase of 0.2% in PPI was less than an expected 0.5% gain as energy was up a bit less than expected at +2.9% and food was a weak -1.6%. Energy prices could well rise the next few months, but weak demand should keep the core rate up at only a modest pace at worse.

The core rate has only been rising a bit, but with the extreme weakness in demand in the industrial sector, it was only a matter of time for a decline to be posted. Core PPI reflects weak demand but is not so weak as to raise deflationary concerns.
Overall, the PPI data aren't really surprising, but are a bit better than expected.

PPI trends were highly volatile in 2008, mirroring the trends in global oil prices. Falling global commodity prices and weak economic demand will keep inflation in check at the producer level. If global economies remain weak in 2009, as is widely expected, inflation at the producer level will be insignificant. There may even be concerns about global deflation.

Category	MAY	APR	MAR	FEB	JAN
Finished Goods	0.2%	0.3%	-1.2%	0.1%	0.9%
Core	-0.1%	0.1%	0.0%	0.2%	0.2%
Capital Equipment	-0.1%	-0.1%	-0.2%	0.1%	0.1%
Consumer Foods	-1.6%	1.5%	-0.7%	-1.6%	0.1%
Energy	2.9%	-0.1%	-5.5%	1.0%	4.1%
Intermediate Materials	0.3%	-0.5%	-1.5%	-0.8%	-0.2%
Core	-0.2%	-0.9%	-0.3%	-0.6%	-0.8%
Crude Materials	3.6%	3.0%	-0.3%	-6.4%	-1.5%
Core	6.7%	-0.6%	-1.6%	-0.1%	1.3%