Producer Prices Show Slowing

Inflation is holding pace but barely, inching an as-expected 0.1 percent higher in May with the year-on-year rate, however, missing expectations with a 4 tenths slowing to 1.8 percent. The less food & energy core held up better with an as-expected 0.2 percent monthly gain with this year-on-year rate hitting expectations with a 1 tenth decline to 2.3 percent. When excluding food, energy and also trade services, producer prices rose a stronger-than-expected 0.4 percent for also a 2.3 percent yearly rate.

Trade services were weak once again, down 0.5 percent for a second straight month and the third decline in the last four months. Weakness here points to soft price and demand conditions for wholesalers and retailers. Keeping to the weakness theme, consumer food prices fell 0.1 percent for a second straight decline and a very modest plus 1.2 percent yearly rate. Foods for exports fell 1.4 percent for a 4.5 percent yearly decline. Energy prices were also weak, down 1.0 percent in the month and down 3.0 percent on the year.

Personal consumption measures proved steady, at a 0.2 percent May gain overall and also when excluding food and energy. When also excluding trade services, personal consumption prices at the producer level rose 0.5 percent.

Another upward indication is a rebound in portfolio management fees, up 1.8 percent on the month and now up 5.5 percent on the year. Fed Chair Jerome Powell predicted this increase at the FOMC in early May to back his confidence at the time that core inflation, running at 1.6 percent in April, would firm back to the Fed's 2 percent target. Watch for consumer prices tomorrow where similarly soft but passable results are expected.