EmailProducer price growth fell to its lowest level since September 2010. Prices increased only 0.2% in May, down from 0.8% in April. The Briefing.com consensus expected the PPI to increase 0.1%.
Surprisingly, the reduction in oil prices in May was not the source of the weakness in price growth. Energy prices still increased 1.5% during the month.
Food prices collapsed and offset the increase in oil prices. Prices fell 1.4% in May after increasing 0.3% in April. The drop was a late correction to the 3.9% increase in food prices in February. At that time, poor weather conditions caused a supply shortage in fresh and dry vegetables. This pushed up vegetable prices 48.7%. As supply returned to more normal levels, prices fell 12.2% in May. We expect a similar decline in June.
Excluding food and energy, core PPI increased 0.2% in May, down from 0.3% in April. The consensus expected core-PPI to increase 0.1%.
A 1.2% increase in plastic prices contributed to the gain in core PPI.
