Wholesale prices were flat in May

Wholesale prices were flat in May

Wholesale prices were flat in May

Excluding the more volatile categories food, fuel and trade, PPI slipped 0.1 per cent for the month, and the 12-month rate was up 2.1 per cent, unchanged from last month. Rising energy prices along with a bump in other commodities had been pushing producer prices up, but the trend weakened last month.

Still, despite inflation missing their targets, a rate hike at the conclusion of the Federal Reserve Open Market Committee's (FOMC) two-day policy meeting on Wednesday is all but certain.

Year-over-year, the producer price index (PPI) rose 2.4% in May, compared to expectations for a gain of 2.3% and following a 2.5% increase in the preceding month.

In this Thursday, March 24, 2016, photo, Chase Ming reaches for a bottle of vodka to seal the cap before receiving a label at the Cathead Distillery in Jackson, Miss.

Lower costs of gasoline and other fuels kept wholesale US inflation in check in May, but upward pressure on prices persisted in many areas of an economy whose expansion is the third longest in modern times. Furthermore, when producers pay more for goods, they are more likely to pass price increases on to the consumer, so PPI could be considered a leading indicator of inflation.

Many analysts expect the Fed to raise rates a total of three times this year. As a result, the cost of goods fell 0.5 percent, reversing April's 0.5 percent increase. Energy prices declined 3.0% and food down 0.2%.

"Over the past year, both core goods and services prices have accelerated, with the year-on-year rates now at 2.2% and 2.1% respectively; both were near zero in late 2015".

Energy prices continued to see sharp declines, with gasoline prices plunging 11.2 per cent, the largest drop since February 2016, while jet fuel costs fell 11 per cent, the biggest decline since January of a year ago.

Food costs fell 0.2 percent as the prices of fresh fruits and melons recorded their biggest drop since June 2010.

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