Producer Prices Drop in U.S. During May

A gauge used in the U.S. for inflation moved lower during May. This was another sign that price pressures are still tame, amidst the slow economic growth and one that likely will ease concern from the central bankers in the country.

The gauge, the producer-price index for final demand is a measure of the changes in prices that companies received for services and goods. The index dropped during May by a seasonally adjusted rate of 0.2% compared to April, said the Labor Department on Friday.

Economists had forecast a rise of 0.2% in prices. Compared to last year producer prices are 2% higher.

The report for May showed that inflationary pressures had fallen off abruptly after increasing in the months of March and April. Prices in May for energy, food and services all dropped compared to April.

A gauge excluding those volatile components remained the same, which gives the indications of weakness being broad-based in prices.

The data said on economists should help ease the concerns amongst some officials at the Federal Reserve that inflation had been picking up steam.

Other economists were more cautious saying that not too much should be read into data from just a single month and that has been giving off readings that were more volatile since January when its methodology was altered.

Producer prices increased in April by 0.6% from the month before. They were driven largely by a surge of 2.7% in the cost of food. In May, the price of food fell by 0.2%.

Officials in the Fed are maintaining a close look at the inflation gauges while rolling back their stimulus bond-buying program.

They have said the recovery is still weak and do not want to start increasing the interest rates until the middle of 2015.

Officials at the Fed look at a moderate amount of inflation as a sign the economy has a healthy demand, while falling or stagnant prices signal a weakness.

Another gauge from the Department of Labor on consumer prices showed a jump in the annual rate to 2% in April from March’s 1.5%. That increase was driven by higher costs of food, shelter and gasoline. Included in that measure, are the taxes that are associated with the purchases.

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