May 2017 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) decreased 0.1% in May (0.0% expected). A decrease in the energy index was the main contributor to the monthly decrease in the all items index. The energy index fell 2.7%, led by a decline of 6.4% in the gasoline index. The food index rose 0.2%, due to increases in four of the six major grocery store food group indexes.

The index for all items less food and energy rose 0.1% in May, as it did in April. The shelter index increased 0.2% over the month. However, many indexes declined in May, including those for apparel, airline fares, communication, and medical care services.

The all items index rose 1.9% for the 12 months ending May, a smaller increase than the 2.2% rise for the 12 months ending April. This month’s increase is still a larger rise than the 1.6% average annual increase over the past 10 years. The index for all items less food and energy rose 1.7% over the previous 12 months; this compares to a 1.8% average annual increase over the past decade. The energy index rose 5.4% over the last year, while the food index increased 0.9%; rent: +3.8% and medical care services: +2.5%.

Producer Price Index

The seasonally adjusted producer price index for final demand (PPI) was unchanged in May (+0.1 expected). Final demand prices rose 0.5% in April and edged down 0.1% in March. Within final demand in May, a 0.3% increase in the index for final demand services offset a 0.5% decline in prices for final demand goods. Prices for final demand less foods, energy, and trade services fell 0.1% in May, the first decline since a similar 0.1% decrease in May 2016.

On an unadjusted basis, the final demand index increased 2.4% for the 12 months ended in May. By contrast, the index for final demand less foods, energy, and trade services moved up 2.1% YoY.

Final Demand

Final demand services: Prices for final demand services rose 0.3% in May following a 0.4% advance in April. The May increase can be attributed to the index for final demand trade services, which moved up 1.1%. (Trade indexes measure changes in margins received by wholesalers and retailers.) In contrast, prices for final demand services less trade, transportation, and warehousing fell 0.1%, and the index for final demand transportation and warehousing services declined 0.5%.

Product detail: About half of the May increase in the index for final demand services can be traced to margins for fuels and lubricants retailing, which rose 16.1%. The indexes for apparel, footwear, and accessories retailing; machinery and equipment wholesaling; residential real estate loans (partial); automobiles and automobile parts retailing; and food wholesaling also moved higher. Conversely, prices for guestroom rental decreased 5.2%. The indexes for airline passenger services and food retailing also moved lower.

Final demand goods: Prices for final demand goods moved down 0.5% in May, the largest decrease since a 0.6% drop in February 2016. Most of the May decline can be attributed to the index for final demand energy, which fell 3.0%. Prices for final demand foods decreased 0.2%. In contrast, the index for final demand goods less foods and energy edged up 0.1%.

Product detail: The May decrease in the index for final demand goods was led by an 11.2% drop in gasoline prices. The indexes for fresh and dry vegetables, jet fuel, fresh fruits and melons, motor vehicles, and home heating oil also fell. Conversely, the index for pharmaceutical preparations rose 0.6%. Prices for beef and veal and for electric power also increased. 

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With the exception of wood fiber all of the not-seasonally adjusted price indexes we track either rose on both MoM and YoY bases. 

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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.