May 2016 Consumer and Producer Price Indices (incl. Forest Products)

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Consumer Price Index

The seasonally adjusted consumer price index for all urban consumers (CPI-U) increased 0.2% in May (+0.3% expected). Over the last 12 months, the all items index rose 1.0% before seasonal adjustment.

The food index declined in May, but the indexes for energy and all items less food and energy rose, resulting in the seasonally adjusted all items increase. The food index fell 0.2%, as all six major grocery store food group indexes declined. The energy index increased 1.2% as the gasoline index rose 2.3% and the indexes for fuel oil and natural gas also advanced. 

The index for all items less food and energy increased 0.2% in May. The shelter index rose 0.4%, and the indexes for medical care, apparel, motor vehicle insurance, and education were among indexes that also increased. These advances more than offset declines in an array of indexes including used cars and trucks, communications, household furnishings and operations, airline fares, and new vehicles.

The all items index rose 1.0% for the 12 months ending May, compared to a 1.1% increase for the 12 months ending April. The index for all items less food and energy rose 2.2% over the last 12 months. The food index has risen 0.7% over the last year, with the index for food at home declining 0.7% and the index for food away from home rising 2.6%. The energy index has declined 10.1% over the past 12 months, with all major components falling over the span. Rents rose by 3.8% YoY, the fastest pace since 2008.

Producer Price Index

The seasonally adjusted producer price index for final demand (PPI) increased 0.4% in May (+0.3% expected). Final demand prices rose 0.2% in April and declined 0.1% in March. On an unadjusted basis, the final demand index inched down 0.1% for the 12 months ended in May.

In May, over 60% of the advance in the final demand index can be traced to prices for final demand goods, which climbed 0.7%. The index for final demand services moved up 0.2%.

Prices for final demand less foods, energy, and trade services edged down 0.1% in May after rising 0.3% in April. For the 12 months ended in May, the index for final demand less foods, energy, and trade services increased 0.8%.

Final Demand

Final demand goods: The index for final demand goods rose 0.7% in May, the largest advance since a 1.2% jump in May 2015. Two-thirds of the May 2016 increase can be traced to prices for final demand energy, which climbed 2.8%. The indexes for final demand goods less foods and energy and for final demand foods both moved up 0.3%.

Product detail: Over one-third of the increase in the index for final demand goods is attributable to gasoline prices, which advanced 6.6%. Prices for diesel fuel, iron and steel scrap, fresh and dry vegetables, jet fuel, and oilseeds also moved higher. In contrast, the index for beef and veal fell 5.2%. Prices for electric power and for carpets and rugs also decreased.

Final demand services: The index for final demand services rose 0.2% in May after inching up 0.1% in April. The May increase can be traced to margins for final demand trade services, which advanced 1.2%. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, prices for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services fell 0.2% and 0.6%, respectively.

Product detail: Leading the rise in prices for final demand services, margins for machinery and equipment wholesaling advanced 3.6%. The indexes for apparel, jewelry, footwear, and accessories retailing; inpatient care; residential property brokerage fees and commissions; flooring and floor coverings retailing; and legal services also increased. In contrast, prices for loan services (partial) declined 3.0%. The indexes for food retailing and airline passenger services also moved lower. 

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All of the not-seasonally adjusted price indexes we track rose on a MoM basis; YoY comparisons were mixed. 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.