Muted US Producer Prices add to string of tame inflation reports

US producer price inflation remained muted in May across the board, another sign that tariffs have yet to result in higher prices for consumers and businesses.The producer price index rose 0.1% from a month earlier, according to a Bureau of Labour Statistics report released Thursday (June 12). The median forecast in a Bloomberg survey of economists called for a 0.2% increase. Excluding food and energy, the PPI also increased 0.1%.
The PPI report follows May consumer price data that showed a fourth month of tame inflation. While the impact of higher tariffs has so far been modest for Americans, economists see price pressures building in the second half of the year as companies look to guard against further margin weakness.
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The PPI data showed wholesaler and retailer margins expanded in May, particularly for vehicle and machinery wholesaling, after declining a month earlier. Margins have see-sawed month to month this year, underscoring uncertainty around the impact of trade policy on prices and demand. Goods prices excluding food and energy rose 0.2%. Services prices increased 0.1%, reflecting a pickup in wholesaler margins.Analysts also pay close attention to the PPI report because some of its components are used to calculate the Federal Reserve’s preferred measure of inflation that’s based on the personal consumption expenditures price index. Those categories were soft in May: airfares and portfolio management fees declined, while health care costs were also tame. The PCE report will be published later this month.

US companies have struggled to navigate twists and turns in the Trump administration’s trade policies in recent weeks after the president announced substantial duties on the country’s trading partners in April. On Wednesday, the White House announced a deal with China that would leave tariffs on many Chinese goods well above the rate before Trump took office.

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Trump also said he intended to send letters to trading partners in the next one to two weeks setting unilateral tariff rates, ahead of a July 9 deadline to reimpose higher duties on dozens of economies.

The May PPI report also showed food prices edged up 0.1% after declining in the prior two months, while energy costs were flat. The costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, barely rose. Unprocessed goods prices fell for a third straight month.