WASHINGTON — US wholesale prices unexpectedly declined last month, according to fresh government data published Thursday, as goods prices fell, in another sign that price pressures eased in May.
The fall in producer prices in May follows the publication of fresh consumer inflation data on Wednesday, which pointed to a slight easing in the rate at which prices were rising.
The shift comes less than five months before the US election in which discontent over inflation is weighing heavily on President Joe Biden’s standing.
The producer price index (PPI) declined by 0.2 percent in May, the Labor Department said in a statement, down sharply from a 0.5 percent rise seen in April.
This was below market expectations of a 0.1 percent monthly rise, according to Briefing.com.
The Federal Reserve voted on Wednesday to hold rates steady and pencil in just one cut this year following an uptick in consumer inflation in the first quarter.
READ: US Fed holds interest rates, now sees just one cut this year
While the May inflation figures paint a more positive picture, the Fed will likely want to see additional evidence of inflation falling sustainably towards its long-term target of two percent before it contemplates cuts.
Still elevated inflation
“These data, coupled with still-high inflation readings, support the Fed’s patient view on policy,” High Frequency Economics chief US economist Rubeela Farooqi wrote in a note to clients.
“However, the undershoot of the expectations will support this morning’s rebellion of bond traders against the one-rate-cut expectation transmitted by the FOMC results yesterday,” she added, referring to the rate-setting Federal Open Market Committee.
Prices rose at an annual rate of 2.2 percent for the 12 months ending in May, 0.1 percentage point below April’s revised figure of 2.3 percent.
Much of the monthly decline can be attributed to a 0.8 percent fall in the index for final demand goods due largely to a 7.1 percent fall in the index for gasoline, while services remained unchanged from a month earlier.
Wholesale prices stripping out volatile food, energy and trade figures came in at 3.2 percent in the year to May, unchanged from April, while the monthly figure was also unchanged from the previous month.