US producer prices rise on gasoline; underlying inflation weak

[WASHINGTON] US producer prices rose for a second straight month in May as the cost of energy products and services increased, but the lingering effects of a strong dollar and lower energy prices will likely keep inflation tame for a while.

The Labor Department said on Wednesday its producer price index for final demand increased 0.4 per cent last month after rising 0.2 per cent in April. In the 12 months through May, the PPI slipped 0.1 per cent after being unchanged in April.

Economists polled by Reuters had forecast the PPI gaining 0.3 per cent last month and slipping 0.1 per cent from a year ago.

A surge in the dollar and the plunge in oil prices between June 2014 and December 2015 have dampened price pressures, keeping inflation below the Federal Reserve's 2 per cent target.

Although the dollar has dropped 1.5 per cent against the currencies of the United States' main trading partners this year and oil prices are near US$50 per barrel, underlying inflation remains benign.

Last month, energy prices jumped 2.8 per cent after increasing 0.2 per cent in April. Energy prices accounted for two-thirds of the 0.7 per cent rise in the cost of goods last month.

Prices for services rose 0.2 per cent after inching up 0.1 per cent in April. The increase reflected an increase in margins received by wholesalers and retailers.

A key measure of underlying producer price pressures that excludes food, energy and trade services dipped 0.1 per cent last month after rising 0.3 per cent in April.

The so-called core PPI was up 0.8 per cent in the 12 months through May. The core PPI increased 0.9 per cent in April.

REUTERS