u.s. producer prices rise 0.2 in may

ECONOMIC REPORT
U.S. producer prices rise 0.2% in May
Core prices rise 0.3% while pipeline inflationary pressures mount
E-mail | Print | | Disable live quotes By Rex Nutting, MarketWatch
Last Update: 8:38 AM ET Jun 13, 2006


WASHINGTON (MarketWatch) -- U.S. producer prices increased 0.2% in May as energy prices moderated, but core prices inched higher amid signs that inflationary pressures are growing.
The Labor Department on Tuesday said prices for finished goods rose 0.2%, while the core PPI -- which excludes food and energy prices -- rose 0.3%.
The results were close to expectations of economists surveyed by MarketWatch, with the PPI a shade under the 0.3% expected and core prices a notch higher than the 0.2% expected.
In April, the PPI had risen 0.9%, with core prices up 0.1%.
In the past year, the PPI is up 4.5%, the fastest year-over-year gain since January. The core PPI is up 1.5% in the past year.
The Federal Reserve will get a better picture of inflationary trends on Wednesday, when the Labor Department reports on the consumer price index for May. Economists expect a 0.4% gain in the headline inflation rate, with a more moderate 0.2% gain in the core CPI.
After 16 consecutive rate hikes, the Fed has signaled that it is likely to raise interest rates again at the end of the month to maintain vigilance against inflation. Most analysts believe, however, that the Fed is close to the end of its tightening cycle.
Further rate increases will depend on the data, especially inflation, housing, consumer spending and job growth. Most Fed officials have said they expect core inflation to remain restrained, but are watchful against any outbreak higher.
So far, higher prices for commodities other than energy have not led to any significant inflation at the consumer level.
In a separate report, the Commerce Department said retail sales rose 0.1% in May, with sales excluding autos up 0.5%. The results were as expected.
While prices for finished goods were relatively tame in May, prices for goods under production jumped.
Intermediate goods prices increased 1.1%, the biggest gain since October. Core intermediate goods prices also rose 1.1%. Intermediate goods have been processed, but will undergo further transformations before final sale.
Crude goods prices increased 2%, also the largest gain since October. Crude goods are essentially raw materials.
At the finished level, energy prices increased 0.4%, with gasoline prices rising 2.2%. Natural gas prices fell 3.1%.
Food prices fell 0.5%.
The core PPI was boosted by a 1.9% rise in pharmaceutical prices. Heavy truck prices rose 1.4%, the most in 3-1/2 years. Car prices fell 0.4%.
Capital equipment prices rose 0.3%.
At the intermediate level, prices for materials for durable goods manufacturing rose 4.4%. Copper and brass mill shapes prices rose 23%. Nonferrous wire and cable prices increased 17%. Prices for materials for construction increased 1.2%.
The core intermediate PPI, which is considered a good gauge of pipeline inflationary pressures, is up 6.3% in the past year, the fastest gain in a year.
At the crude level, energy prices rose 2.5%. Prices of crude materials excluding energy rose 1.4%.
Rex Nutting is Washington bureau chief of MarketWatch.