US Producer Price Inflation Hovers Near Record Highs, Energy Costs Dominate


Courtesy of ZeroHedge View original post here.

Following CPI's unexpected crushing of the 'peak inflation' narrative, analysts expected PPI to slow modestly from 11.0% YoY to 10.9% YoY in May. US Producer Prices actually printed a slight miss at +10.8% YoY and was up 0.8% MoM – the 25th straight month of increasing prices…

Source: Bloomberg

Nearly two thirds of the May increase was due to an advance in goods prices, especially energy.

On Goods:

Forty percent of the May increase in prices for final demand goods can be attributed to an 8.4-percent advance in the index for gasoline. Prices for jet fuel, residential natural gas, steel mill products, diesel fuel, and processed young chickens also moved higher.

Conversely, the index for beef and veal fell 9.5 percent. Prices for iron and steel scrap and for commercial electric power also decreased.

On Services:

Nearly 30 percent of the May increase in the index for final demand services can be attributed to prices for truck transportation of freight, which rose 2.9 percent. The indexes for services related to securities brokerage and dealing (partial), machinery and equipment wholesaling, chemicals and allied products wholesaling, automobiles and automobile parts retailing, and transportation of passengers (partial) also advanced.

In contrast, margins for fuels and lubricants retailing declined 21.7 percent. The indexes for portfolio management and for guestroom rental also moved lower.

Core PPI also missed expectations (to the downside), rising 0.5% MoM (vs +0.6% exp) and +8.3% YoY (vs +8.6% exp). Notably April's data was revised significantly lower across the board.

The pipeline for producer price inflation remains troublesome as intermediate demand goods prices stubbornly remained notably above the headline…

Source: Bloomberg

Finally, margins remain under pressure as the CPI-PPI proxy remains significantly underwater…

Source: Bloomberg

So, will a 75bps hike tomorrow fix all this?

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