May PPI

Updated 25-Jun-08 09:25 ET

Highlights

PPI reflect the well-recognized pressures from commodity prices but only moderate pressures from core prices.
The outlook is for moderate core price pressures (due to weak demand) that push core consumer prices only a bit. The outlook for commodity prices, however, remains highly uncertain and is the key factor in the inflation outlook at this time.

Annual growth rose to a quarter century high of 7.4% in January given the surge in energy prices but has fallen off to 6.5% yoy in April. Annual growth was just 2.3% in August before the acceleration in energy prices. Higher food prices also weigh in as the core component has turned a stronger as well and stands 2.7% above the year ago level. More important, to date core producer pipeline pressures are not providing any lift to core consumer prices. CPI core commodity prices are flat from a year ago despite the rise in core PPI prices. That is, core wholesale/commodity pricing pressures aren't yet pressuring retail prices as non-core energy and food prices are. Services, not included in PPI, are the key pressures in consumer prices.

Category	May	Apr	Mar	Feb	Jan
Finished Goods	1.4%	0.2%	1.1	0.3	1.1
Core	0.2%	0.4	0.2	0.5	0.5
Capital Equipment	0.1	0.4	0.1	0.5	0.4
Consumer Foods	0.8	0.0	1.2	-0.5	1.7
Energy	4.9	-0.2	2.9	0.8	2.1
Intermediate Materials	2.9%	0.9%	2.3	0.8	1.1
Core	2.0	1.2	1.1	0.6	0.8
Crude Materials	6.7%	3.2%	8.0	3.7	3.1
Core	5.0	7.9	3.5	3.3	5.1