U.S. producer prices surprisingly fell in May amid lower energy costs, signaling a slowdown in inflation after its surge in the first quarter of 2024. According to the Department of Labor’s Bureau of Labor Statistics, the producer price index (PPI) for final demand declined 0.2 percent last month after rising by 0.5 percent in April.
Excluding food, energy and trade services, U.S. producer prices remained unchanged in May. Meanwhile, the all-items U.S. producer price index rose 2.2 percent year-on-year. The data also revealed that the energy index declined 4.8 percent while food prices fell 0.1 percent.
Declining inflation raises rate cut speculations
On Wednesday, the Bureau of Labor Statistics announced that inflation in the U.S. fell to 3.3 percent annually in May from 3.4 percent in April. The annual core Consumer Price Index rose 3.4 percent, below the 3.6 percent increase it recorded in April. Month-on-month, the CPI remained stable while the core CPI rose by 0.2 percent. This data boosted market hopes that the Federal Reserve would start cutting interest rates in September.
Despite signs of slowing inflation and declining producer prices, the U.S. Federal Reserve kept interest rates at the 5.25-5.50 percent range on Wednesday, where it has been since July 2023. The Fed has raised its policy rate by 525 basis points since March 2022 in an effort to bring down inflation to the central bank’s target of 2 percent.
Read: ECB shouldn’t rush or delay future interest rate cuts: Bank of France governor
The Department of Labor also released the weekly jobless claims data on Thursday, which saw a jump to 242,000 in the week ending June 8. That’s the highest level since August 2023 and an increase of 13,000 from the previous report.
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