MNI DATA ANALYSIS: May PPI Rose 0.5%, Up 0.3% Core>

--May PPI Ex. Food, Energy, Trade +0.1%; Trade Services +0.9%

--PPI +3.1% Y/Y Vs +2.6% In April, Ex Food, Energy +2.4% Vs +2.3%

By Kevin Kastner and Holly Stokes

     WASHINGTON (MNI) - Final demand PPI surged by 0.5% in May, much 

stronger than the 0.2% gain expected, with an unexpected 0.3% gain 

outside of food and energy prices, data released by the Bureau of Labor 

Statistics Wednesday showed. 

     The overall month/month gain was larger than seen in May 2017, 

which resulted in a surge in the year/year rate. Likewise, PPI ex food 

and energy saw a small rise in its year/year rate. These gains only 

serve to support a gradual rate hike path for the FOMC. 

     The personal consumption price measure in the data, which some 

analysts use as a preview measure for the PCE price index, rose by 0.5% 

overall, rose by 0.3% ex. food and energy, and were up 0.2% excluding 

trade services, suggesting an upside risk to the PCE inflation data. 

     Within the core, there were offsetting movements in a number of 

categories. Passenger car prices fell 0.1%, but light truck prices rose 

0.6%. Overall final demand services prices were up 0.3%. 

--ENERGY SURGE, FOOD MILD

     Energy prices rose 4.6% in May after a small April rebound, led by 

a 9.8% jump in gasoline prices and a 15.8% spike in jet fuel prices. 

Diesel fuel and electric power prices were also up. 

     Food prices rose only 0.1%, with higher vegetable prices offset by 

another decline in egg prices and a record drop in seafood prices. 

     Trade services prices rose 0.9% in the month, while the PPI core 

rate the BLS prefers, which excludes the change in trade services as 

well as food and energy, rose only 0.1% in May. 

--Y/Y INFLATION JUMPS 

     The year/year rates for these measures indicated acceleration, due 

in large part to the energy surge. Overall PPI was up 3.1% year/year in 

May after a 2.6% year/year rise in April, the largest gain in over six 

years, as the headline index was up only 0.1% in May 2017. 

     At the same time, the year/year rate for PPI excluding food and 

energy ticked up to 2.4% from 2.3% in April as a 0.3% gain in May 2017 

rolled out of the equation. The year/year rate for PPI excluding food, 

energy and trade services rose to 2.6% from 2.5%. 

     ** MNI Washington Bureau: 202-371-2121 **

[TOPICS: MAUDS$,M$U$$$,MT$$$$,MAUDR$]