Producer Price Index for May 2022

 

Once again, it is time to browse through the BLS PPI Report for May. (Historical Page)

The Producer Price Index for final demand increased 0.8 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 0.4 percent in April and 1.6 percent in March. (See table A.) On an unadjusted basis, final demand prices moved up 10.8 percent for the 12 months ended in May.

In May, nearly two-thirds of the rise in the index for final demand was due to a 1.4-percent advance in prices for final demand goods. The index for final demand services increased 0.4 percent.

Prices for final demand less foods, energy, and trade services moved up 0.5 percent in May after increasing 0.4 percent in April. For the 12 months ended in May, the index for final demand less foods, energy, and trade services rose 6.8 percent.

Simple math... the index rose 10.8% in May and the index less foods, energy and trade services was up 6.8%. So guess what rose substantially faster than 10.8% overall... Yep, foods, energy and trade services. I suspect you already knew that, but remember this is PRODUCER prices, not retail. Can you guess what gets passed on to the consumer? Ouch! 

So it is no wonder that people much smarter I, have quickly revised the CPI forecast upward. There is "some" good news, although it can easily be explained away as a blip. Producer Food Prices did pause in May, which is not to say they fell very much. The easy explanation would be demand for cheaper foods may be in play. The beef and veal index, slipped 9.5%, but chickens rose. 

Still looking for that indication that the rapid upward trajectory of Inflation will pause... and it will happen. But when? However, it would be foolish to expect a reversal in pricing, especially in the food area. Demand destruction might come into play for all other items, but food is a tough one to cut back on. 

There seems to be a bit of turmoil in Natural Gas prices, as Freeport now suggests a much longer timeline for a full restart. That has significantly brought down the NatGas futures on the Henry Hub, but that drop is to levels not seen since April or May. Whoopee! 

On to the next report.