Producer Price Index (PPI)
This morning’s release of May’s Producer Price Index (PPI) gave us mixed readings about inflationary pressures at the wholesale level of the economy. The overall PPI exceeded expectations of a 0.7% increase by a pretty good margin with a 1.1% jump for the month. However, the more important core data that excludes volatile food and energy costs rose 0.4%, falling short of the 0.5% that was predicted. On an annual basis, the overall PPI moved to a 6.5% rate, up from April’s 6.0%. Good news came in the annual core reading that slipped from April’s 5.2% pace to 4.9% for May. Forecasts had the year-over-year readings at up 6.4% and 5.4% respectively. In short, some of the wholesale inflation numbers can be labeled good news since they were under expectations, but the numbers themselves are still concerning since they are well above the Fed’s 2.0% goal and could cause the Fed to raise key short-term rates long before we see another rate cut.