Energy costs boost producer prices in May

WASHINGTON – The Producer Price Index for Finished Goods (a measure of wholesale prices) rose a seasonally adjusted 0.9 percent in May, fueled by higher energy and metals costs, the U.S. Bureau of Labor Statistics reported today.
The increase exceeded expectations, according to Bloomberg News, whose survey of 76 economists had a median forecast of 0.6 percent. But although the index’s growth rebounded slightly from April’s 0.7 percent, it remained below the 1.0 percent in March and 1.3 percent in February.
The Federal Reserve’s preferred measure – the core PPI, excluding food and energy – rose 0.2 percent in May, erasing April’s 0.1-percent decline.
Among finished goods, the BLS said, capital equipment prices edged up 0.1 percent in May, for the second consecutive month. Meanwhile, consumer foods dipped 0.2 percent in May after rising 0.4 percent the month before and energy goods rose 4.1 percent, accelerating from April’s 3.4-percent gain
Compared with May 2006, the PPI rose 4.5 percent and the core index rose 1.6 percent. The index for finished consumer foods rose 8.5 percent over the year while finished energy goods rose 7.2 percent.
“We have a lot of energy-price pressures that are still working through the system” said Stephen Gallagher, chief economist at Societe Generale in New York and one of two economists in the Bloomberg survey who pegged the jump in wholesale prices. “The Fed is going to be worried.”
Additional information, including the 18-page Producer Price Indexes report, is available from the U.S. Department of Labor’s Bureau of Labor Statistics at www.bls.gov/ppi.