Producer Price Index – Down 1%, Core Up 0.2%
Lower crude oil prices are working their way into softer inflation again in May. And food prices have weakened. The PPI in May dropped a sharp 1.0 percent, following a fall of 0.2 percent in April. Analysts forecast a 0.6 percent decrease for the headline number. The core PPI, however, advanced 0.2 percent after rising 0.2 percent in April. The market consensus was for a 0.2 percent increase.
By major components, energy fell 4.3 percent, following a decrease of 1.4 percent in April. Gasoline prices plunged a monthly 8.9 percent after falling 1.7 percent the prior month. Food cost inflation dropped to minus 0.6 percent, following a 0.2 percent rise in April.
Within the core, over a quarter of the May rise can be attributed to the pharmaceutical preparations index, which climbed 0.7 percent. For other notable components, passenger cars rose 0.2 percent while light trucks declined 0.4 percent.
For the overall PPI, the year-ago rate in May was 0.8 percent, compared to 1.9 in April (seasonally adjusted). The core rate in May held steady at 2.8 percent. On a not seasonally adjusted basis for May, the year-ago headline PPI was up 0.7 percent, compared to up 1.9 percent for April while the core was up 2.7 percent, matching the pace in April on an NSA year-ago basis.
Retail Sales- Drop in Gas Prices Drive Retail Sales Down 0.2%
Retail sales in May were pulled down by a decrease in gasoline prices. Retail sales in May declined 0.2 percent, following a 0.2 percent dip in April (originally up 0.1 percent). The consensus projection was for a 0.2 percent decrease.
Motor vehicle sales actually added to sales, gaining 0.8 percent, following a 0.1 percent rise in April.
Excluding motor vehicles, retail sales fell 0.4 percent, following a 0.3 percent decline in April (originally up 0.1 percent). The market consensus was for down 0.1 percent. Gasoline sales dropped a sharp 2.2 percent after declining 1.4 percent in April.
Sales excluding autos and gasoline in May posted a modest 0.1 percent dip, matching the decline in April (originally up 0.1 percent). Core components were mixed but mostly down.
Weakness was led by gasoline stations (down 2.2 percent) and building materials & garden equipment (down 1.7 percent). Also declining were food & beverages, health & personal care, sporting goods & hobby, general merchandise, miscellaneous store retailers, and food services & drinking places.
On the plus side, nonstore retailers gained 1.3 percent, clothing & accessories rose 0.9 percent, electronics & appliances advanced 0.8 percent, and furniture & furnishings increased 0.4 percent.
Overall, consumer spending turned sluggish in May and April was softer than earlier believed. However, a key question that remains is whether atypically warm weather in the winter shifted sales forward at the expense of later months.
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