• Price index increases for first time in four months

• Prices less food & energy slip.

• Core goods prices hold steady while services prices ease.

With industrial sector activity under pressure, pricing power remains constrained. The Producer Price Index for final demand increased 0.4% (-0.8% y/y) during May following a 1.3% March decline. No change in the PPI had been expected in the Action Economics Forecast Survey. Underlying pricing pressure remained weak. Producer prices excluding food & energy matched expectations and eased 0.1% (+0.3% y/y), the third decline in four months. The PPI excluding food, beverages and trade services, another measure of underlying price inflation, improved 0.1% (-0.4% y/y) after a 0.9% April decline.

A 6.0% increase in food prices led the PPI higher last month as the coronavirus raised some product costs. A 69.1% jump (78.0% y/y) in beef & veal prices led the increase. Fresh fruit & melon prices strengthened 11.4% (7.1% y/y) and vegetable prices rose 2.7% (-9.7% y/y). Oilseed prices rose 2.9% (7.1% y/y). These gains were offset by a 44.0% drop (+63.8% y/y) in fresh egg prices and a 3.5% decline (-6.6% y/y) in dairy product prices.

A 4.5% rebound in energy prices also was part of the rise in producer prices last month. Gasoline prices increased 43.9% (-52.5% y/y) and natural gas prices rose 0.7% (-0.7% y/y). To the downside, home heating oil prices were off 34.6% (-65.4.7% y/y) and the cost of electric power slipped 0.3% both m/m and y/y.

Final demand goods prices less food & energy held steady in May (+0.2% y/y) after a 0.4% decline in April. The cost of finished consumer goods less food & energy improved 0.1% (1.0% y/y). Core nondurable goods prices fell 0.2% (+1.5% y/y) following years of strength. Women's apparel prices weakened 0.7% y/y but men's clothing costs rose 0.6% y/y. Durable consumer product prices improved 0.3% y/y.

For businesses, private capital equipment prices rose 0.2% last month (1.0% y/y) and reversed the prior month's decline.

Services prices for final demand slipped 0.2% in May (+0.3% y/y) for a second straight month. Trade services prices fell 0.8% (+2.7% y/y), as the cost of trade of finished goods weakened 0.9% (+2.9% y/y). A 1.5% rise (-5.4% y/y) in transportation & warehousing services prices offset the decline. Excluding these costs, prices held steady (-0.2% y/y).

The cost of construction eased 0.1% (+2.5% y/y) following a 0.5% strengthening.

Intermediate product prices edged 0.1% higher (-6.8% y/y) following a 3.7% decline.

The PPI data can be found in Haver's USECON database. Further detail can be found in PPI and PPIR. The expectations figures are available in the AS1REPNA database.