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Investing.com - U.S. producer prices returned to growth on a monthly basis in May following an increase in final demand services costs, with demand for travelers’ accommodations helping offset a fall in air fares.
The producer price index for final demand inched up by 0.1% month-on-month, after a 0.2% drop in April. Economists had anticipated an uptick of 0.2%.
In the twelve months to May, the figure came in at 2.6%, matching expectations and speeding up marginally from 2.5% in April.
The index for final demand services moved up by 0.1%, reversing a 0.4% decrease in April, led by prices for hotel accommodations. However, prices for airline passenger services dipped 1.1%, while portfolio management costs also dropped.
Crucially, accommodations, airline fares, and portfolio management fees make up some of the components that factor into an inflation gauge preferred by Federal Reserve interest rate setters.
Stripping out items like food, fuel and trade services, the PPI edged higher by 0.1% after a 0.1% decrease in the previous month. The annualized pace was 2.7%, down from 2.9%.
The numbers come after U.S. consumer prices rose at a slower-than-anticipated annualized pace in May.
The Labor Department’s consumer price index on Wednesday increased by 2.4% year-over-year last month, accelerating from 2.3% in April but cooler than expectations of 2.5%. On a monthly basis, the measure eased to 0.1%. Economists had projected that the gauge would match April’s reading of 0.2%.
An uptick in shelter costs underpinned much of May’s increase, although this was offset by falling gasoline prices that dragged energy expenses down 1%, the Bureau of Labor Statistics said in a statement.
"This is the second muted inflation reading in as many days and is likely to keep pressure on the U.S. dollar while giving a lift to Treasuries," analysts at Vital Knowledge said in a note.
They added, although the Fed is projected to maintain its wait-and-see approach to policy at its upcoming meeting on June 18, "given the trajectory of May data [...], the forward guidance could evolve modestly in a dovish direction."