Producer prices fall sharply as energy costs decrease
Producer price inflation fell sharply in the United States in May due to a sharp drop in energy prices. Energy costs fell the most in over three years in the same period, suggesting inflation pressures may abate and may well give more breathing space to the Federal Reserve to be able to help lift the economy should it stagnate.
The Labor Department said producer price index m/m fell to -1% in May, versus consensus for a -0.6% drop compared to -0.2% in April. PPI y/y eased to 0.7% from 1.9% against a forecast for 1.1%. Core prices compared to the period last year inched lower than expectations, to 2.7% versus 2.8%, unchanged from the previous month, while PPI ex food and energy m/m were unchanged at 0.2% as expected.
Energy prices declined 4.3%, its largest decline since March 2009, as Europe’s debt crisis continues to threaten global growth, and were the reasons behind slower inflation.
EUR/USD pushed higher to a session high of 1.2561 just after the data.
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