WASHINGTON: Lower costs of gasoline and other fuels kept wholesale U.S. 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. The producer price index was flat last month following a sharp 0.5% increase in April, the government said Tuesday. Economists surveyed by MarketWatch had predicted no change in the PPI. Still, inflation is more widespread after being largely invisible in 2016. The 12-month rate of wholesale inflation stood at a 2.4% in May, up from zero a year earlier and just a notch below a five-year high. The Federal Reserve is expected to raise U.S. interest rates this week in part because of a rebound in inflation even though price pressures are relatively modest on a historical basis. The Fed could adopt a slower approach to raising rates, however, if inflation cools off as it’s done in recent months. The flat reading in wholesale inflation in May, as expected, was tied to falling prices for gas and fuels used to heat and cool homes. The wholesale cost of gasoline sank 11.2%.
The wholesale cost of food also fell for the first time in six months. Core wholesale costs slipped 0.1% in May, when stripping out the volatile categories of energy, food and retail trade margins. The cost of airline tickets, hotel rooms and brokerage fees declined. The core rate of inflation was up 2.1% over the past 12 months, unchanged from April. The core price measure gets more attention from the Fed and Wall Street. The cost of partly finished goods, meanwhile, rose 0.1% in May while prices for raw materials fell 3%. Yet prices for both are sharply higher compared to a year ago, suggesting that inflationary pressure is unlikely to recede much. In recent Tuesday trades, the Dow Jones Industrial Average DJIA, +0.44% rose modestly. U.S. Treasury prices TMUBMUSD02Y, -0.88% were little changed.
