A report released by the Labor Department on Thursday revealed that producer prices in the U.S. unexpectedly declined in May.
The Labor Department announced that its producer price index (PPI) for final demand fell by 0.2 percent in May, following a 0.5 percent increase in April. Economists had anticipated a slight rise of 0.1 percent.
"The unexpected drop in wholesale prices supports the view that disinflation is beginning to take hold more consistently," stated Quincy Krosby, Chief Global Strategist for LPL Financial.
Additionally, the report noted that the annual growth rate of producer prices decelerated to 2.2 percent in May from an upwardly revised 2.3 percent in April. Economists had forecasted that the annual growth rate would accelerate to 2.5 percent, compared to the originally reported 2.2 percent for the previous month.
The unexpected monthly decline in producer prices was largely due to a significant reduction in energy prices, which plunged by 4.8 percent in May after a 2.0 percent increase in April.
This sharp drop in energy prices contributed to a 0.8 percent decrease in the prices of goods. However, prices for goods excluding food and energy saw a 0.3 percent increase.
Meanwhile, prices for services remained unchanged, as a 1.4 percent decline in prices for transportation and warehousing services balanced out increases in prices for trade and other services.
The report also highlighted that core producer prices, excluding food, energy, and trade services, were stable in May after a 0.5 percent rise in April. The annual growth rate for core producer prices stood at 3.2 percent in May, consistent with an upwardly revised April reading.
A separate Labor Department report released on Wednesday indicated that U.S. consumer prices were unexpectedly flat in May. The department stated that its consumer price index (CPI) was unchanged in May after a 0.3 percent rise in April. Economists had predicted a slight increase of 0.1 percent.
Excluding food and energy, core consumer prices rose by 0.2 percent in May, following a 0.3 percent increase in April. Core prices were anticipated to rise by 0.3 percent.
The report also mentioned that the annual growth rate of consumer prices slowed to 3.3 percent in May from 3.4 percent in April. Economists had expected the growth rate to remain steady.
The annual growth rate for core consumer prices decreased to 3.4 percent in May from 3.6 percent in April, with predictions anticipating a slight decline to 3.5 percent.
