U.S. Producer Prices Unexpectedly Dip In May, Annual Growth Slows

(RTTNews) - A report released by the Labor Department on Thursday showed producer prices in the U.S. unexpectedly edged lower in the month of May.

The Labor Department said its producer price index for final demand dipped by 0.2 percent in May after climbing by 0.5 percent in April. Economists had expected producer prices to inch up by 0.1 percent.

"The surprise drop in wholesale prices helps support expectations that disinflation has begun to inch lower on a more sustained basis," said Quincy Krosby, Chief Global Strategist for LPL Financial.

The report also said the annual rate of producer price growth slowed to 2.2 percent in May from an upwardly revised 2.3 percent in April.

Economists had expected the annual rate of producer price growth to accelerate to 2.5 percent from the 2.2 percent originally reported for the previous month.

The unexpected monthly dip by producer prices largely reflected a sharp pullback by energy prices, which plunged by 4.8 percent in May after surging by 2.0 percent in April.

The steep drop in energy prices contributed to a 0.8 percent decrease in prices for goods, although prices for goods rose by 0.3 percent when excluding food and energy prices.

Meanwhile, the Labor Department said prices for services came in unchanged, as a 1.4 percent slump by prices for transportation and warehousing services offset upticks in prices for trade and other services.

The report also said core producer prices, which exclude prices for foods, energy, and trade services, were unchanged in May after climbing by 0.5 percent in April.

The annual rate of growth by core producer prices came in at 3.2 percent in May, unchanged from an upwardly revised reading in April.

A separate report released by the Labor Department on Wednesday showed U.S. consumer prices were unexpectedly flat in the month of May.

The Labor Department said its consumer price index came in unchanged in May after rising by 0.3 percent in April. Economists had expected consumer prices to inch up by 0.1 percent.

Excluding food and energy prices, core consumer prices rose by 0.2 percent in May after climbing by 0.3 percent in April. Core prices were expected to increase by another 0.3 percent.

The report also said the annual rate of consumer price growth slowed to 3.3 percent in May from 3.4 percent in April. Economists had expected the pace of growth to remain unchanged.

The annual rate of core consumer price growth also slowed to 3.4 percent in May from 3.6 percent in April. The pace of growth was expected to dip to 3.5 percent.