–Unrounded Core +0.01650%; YOY core +2.7%: Not Deflation
By Joseph Plocek
WASHINGTON (MNI) – The May producer price data came in better than
expected in a favorable development, but do not suggest deflation since
rates of change from last year are still positive.
May PPI printed -1.0% and core +0.2% (0.1650% unrounded). These
represented +0.7% overall (an eighth month of slowing) and +2.7% core
for year-over-year changes.
May marked the biggest decline in monthly overall PPI since -1.2%
in July 2009. Severe seasonal adjustment also added to the decline
(unadjusted PPI printed a ‘mere’ -0.6%).
Foods surprised at -0.6% as fruits, meats, and beverage prices
fell; these added to expected drops in energy to pull down the month’s
change. About 60% of the movement in foods stemmed from the -2.2% for
meats.
Energy printed -4.3% in its biggest drop since -4.6% in March 2009.
Gasoline posted -8.9% (-4.4% unadjusted) and represented about 80% of
the drop. Residential natural gas printed -2.5% and liquefied petroleum
gas posted -9.8% in its worst showing since -22.4% in December 2008.
Home heating oil advanced 1.5%.
Core was boosted by commercial furniture at +1.8%, pharmaceuticals
at +0.7%, and plastics at +0.3%. Core prices remain stickier than either
food or energy. Pharma represented about 1/4 of the core gain and has
been a price problem for some time.
Intermediate PPI printed -0.8% and crude -3.2% as only animal feeds
advanced. The Bureau of Labor Statistics said demand dropped for metals,
chemicals and meats.
These data do not represent deflation but rather a slowing from
prior advances. Over-the-year rates of change in prices are still
positive, although the outsized May drop turned the year-to-date change
in PPI to a negative at -1.6%.
But lower PPI numbers will take pressure off corporate margins and
should relieve price pressures down the road.
**MNI Washington Bureau: (202)371-2121**
[TOPICS: MAUDS$,M$U$$$,MT$$$$,MAUDR$]