PPI: Prices Continue to Inflate Year-over-Year in May 2011

Year-over-Year price growth of the Producer Price Index (PPI) rose from 6.6% to 7.3% in May 2011.

The Producer Price Index for finished goods rose 0.2 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed increases of 0.8 percent in April and 0.7 percent in March. At the earlier stages of processing, prices received by manufacturers of intermediate goods climbed 0.9 percent in May, and the crude goods index declined 4.1 percent. On an unadjusted basis, prices for finished goods moved up 7.3 percent for the 12 months ended May 2011, the largest year-over-year gain since an 8.8-percent advance in September 2008.

The May advance in the finished goods index can be traced primarily to prices for finished energy goods, which rose 1.5 percent. The index for finished goods less foods and energy moved up 0.2 percent. By contrast, prices for finished consumer foods fell 1.4 percent in May.

Econintersect believes YoY evaluation removes the noise of seasonally adjusted new normal data.  The PPI is growing more and more volatile in recent times.  It is hard to explain the size of the difference between the export price index which is up 9.0% – and the PPI finished goods index only up 7.3% (analysis here) -as both indexes are a different mix of the same sector.

Econintersect has shown how the pricing changes moves from the PPI to the Consumer Price Index (CPI).  This YoY change implies that the CPI – which will be released later this week, should come in a little over 3% YoY.  Last month the CPI YoY change was 3.2% (analysis here) – and Econintersect also predicted a 3% YoY growth.

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