April 22, 2024


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The headline inflation gauge slows slightly, but remains uncomfortably high

The headline inflation gauge slows slightly, but remains uncomfortably high

The Producer Price Index, which measures wholesale prices before goods and services reach consumers, rose 10.8% in May from a year earlier, according to data released Tuesday by the Bureau of Labor Statistics.

While this is lower than the adjusted rise of 10.9% reported in April reading, still high by historical standards. The producer price index did not register a double increase in data going back to 2009 until last December.

“The continued rise in producer costs suggests that consumers will find little relief from inflation in the coming months as these costs exceed those costs,” said Kurt Rankin, chief economist at PNC.

While the PPI measures wholesale prices, not the retail prices paid by consumers, it has an ultimate impact on consumers and the economy in general.

said Peter Bokfar, chief investment officer at Bleakley Consulting Group.

Excluding volatile food and energy items, the so-called core PPI posted an 8.3% gain over the past 12 months, compared to an adjusted rise of 8.6% in that April reading.

Much of the increase is due to Energy price hike. Wholesale energy prices are up 5% in May compared to April, and have increased 44.6% over the past 12 months.
The 8.4% monthly increase in wholesale gasoline prices in May led to a 66.2% rise in gasoline over the year. national average for gallons of gasoline The retail level hit $5 for the first time ever over the weekend, according to AAA numbers.
The good news for consumers is that wholesale food prices have not shown an increase month after month, despite the higher retail prices of those goods. Wholesale food prices are still up 13.3% in the past 12 months, and retail prices are up 13.3% in the last 12 months Buying food to eat at home It posted a 1.4% one-month increase in May and an 11.9% increase over the past 12 months, according to a previous Labor Department reading.
Another indication of the improvement was the just 0.4% monthly rise in wholesale prices for cars and trucks, after a 1% rise on that basis in April. But automakers, whose production was limited to Computer chips shortageProduction is finally back to pre-pandemic levels, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

“On a monthly basis, we’re seeing encouraging signs on the sidelines,” Shepherdson said.

Tuesday’s PPI report comes after the latest Consumer Price Index The report showed the fastest rate of price hikes for consumers in more than 40 years. Together, these reports will likely put more pressure on Federal Reserve To raise interest rates more aggressively in order to combat inflationary pressures.
Inflation rises at fastest pace in 40 years, driven by record gas prices
central bank Raised the benchmark interest rate by half a percentage point in May For the first time since 2000. The two-day monetary policy-making meeting begins on Tuesday, and Can announce an increase of three-quarters of a percentage point At the conclusion of its meeting on Wednesday. would be Biggest jump At this key rate since 1994.

But some economists question whether the Fed can really do much to curb inflation, given soaring energy prices due to the war in Ukraine and sanctions on Russian oil exports, as well as ongoing supply chain issues.

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“The Fed’s blunt toolkit will do little to mitigate supply-side disruptions,” said a note from Oxford Economics. “As such, risks to producer price inflation remain skewed to the upside in the near term, and any sustained moderation will only come gradually during the second half of 2022.”