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First Cut: Upward pressure in service prices keeps May Final Demand PPI from declining

The Final Demand PPI for May was up 0.1% month-over-month in spite of a 0.3% decline in foods (weight 5.744), 1.0% fall in energy prices (weight 5.279), and 0.5% decrease for trade services (weight 20.411). The core PPI was up 0.4%, reflecting a 0.3% increase in final demand services (weight 65.510) that was due to a substantial increase of 0.7% in trade and warehousing, and “other” services of up 0.5%. Final Demand services less trade, transportation, and warehousing was up 0.5% in May from April.

The year-over-year increase in Final Demand PPI was 1.8%, while the core was up 2.3% and driven in large part by increases of 2.1% in trade services. The pace of year-over-year gains has generally moderated in 2019 to-date, while the core has accelerated.

The PPI is not the most closely watched of the inflation indicators. However, the May numbers suggest that if upward pressure on goods prices has softened, that for services has firmed and will likely keep overall prices from slipping.

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