U.S. Wholesale Prices Dropped In May, Fed May Begin Easing Monetary Policy: MIDF

U.S. wholesale price increases fell in May, the latest sign that inflation pressures in the United States may be easing as the Federal Reserve considers a timetable for cutting interest rates. The Labor Department reported Thursday that its producer price index declined 0.2% from April to May after rising 0.5% the month before, pulled down by a 7.1% plunge in gasoline prices.

MIDF Research opined today (June 14) the easing of PPI inflation suggests easing inflationary pressure. Combined with the softer labour market conditions, as MIDF continues to anticipate that the Fed will begin to ease its monetary policy in the latter part of 2HCY24.

The US producer price inflation decelerated to +2.2%yoy in May-24 (Apr-24: +2.3%yoy) against market expectations for a faster rise of +2.5%yoy. Core PPI, excluding food and energy, also dipped to +2.3%yoy (Apr-24: +2.4%yoy).

Service production costs increased slower at +2.6%yoy (Apr-24: +2.8%yoy). In contrast, goods-producing input inflation quickened to +1.6%yoy (Apr-24: +1.2%yoy), the fastest rise in 14 months.

On month-on-month basis, the headline PPI fell by -0.2%mom (Apr-24: +0.5%mom; market consensus: +0.1%mom) due to declines in energy prices.

Core PPI inflation was flat (Apr-24: +0.5%mom), indicating prices excluding foods and energy were broadly unchanged. In another release, initial jobless claims for the week ending 8th June 2024 jumped to 242K (previous week: 229K), exceeding market expectations of 225K, indicating further labour market cooling.

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