Inflationary Pressures Lessen in May

By June 14, 2012Economy

Yesterday, the Bureau of Labor Statistics (BLS) reported that producer prices for finished goods were 1 percent lower in May, following a 0.2 percent decline in April. Lower energy and food costs were largely responsible for the decrease. Energy prices, for instance, were 4.3 percent lower. Excluding food and energy, core inflation at the producer level was up 0.2 percent.

Lower energy costs also pushed intermediate and crude goods prices lower, down 0.8 percent and 3.2 percent respectively.

Manufacturers have benefited from the easing in inflation, with raw material prices down 0.6 percent in May. With recent declines, the year-over-year increase in prices has fallen to 0.9 percent.

Sectors with the largest monthly increases in prices include wood products (up 1.1 percent), textile products (up 0.6 percent), chemicals (up 0.5 percent) and furniture manufacturing (up 0.4 percent). Petroleum and coal manufacturing costs led the decrease, down 3.9 percent for the month. Other declining sectors were primary metals (down 1.3 percent) and food manufacturing (down 0.6 percent).

Meanwhile, consumers have also seen reduced food and energy costs. According to BLS data released this morning, the consumer price index fell 0.3 percent in May. It had been unchanged in April. Gasoline prices were down 6.8 percent, with overall energy costs down 4.3 percent. Food costs were flat.

Core inflation rose 0.2 percent for the month, or 2.3 percent since May 2011. This remains above the Federal Reserve’s stated target of 2 percent. With that said, the Fed appears to be less worried about inflation right now, and it is instead more concerned with global economic growth. In addition, as this month’s data  suggests, overall inflationary pressures tend to be easing, especially with energy costs significantly lower.

Chad Moutray is chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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