Wholesale prices barely rise in May, PPI shows, and inflation poses little threat

The numbers: The wholesale cost of goods and services barely rose in May, reflecting easing inflationary pressures in the U.S. amid slower economic growth and fading gasoline prices.

The producer price index edged up 0.1% last month, the government said Tuesday, matching the MarketWatch forecast.

The increase in wholesale prices over the past year, meanwhile, slowed to 1.8% from 2.2% in April, and they’re down sharply from a recent highwater mark of 3.1% last summer.

Another measure of wholesale costs known as core PPI rose 0.4% last month, largely because of an increase in the volatile cost of services. The 12-month rate climbed to 2.3% from 2.2%, but it’s still sharply lower compared to last fall when it topped 3%.

What happened: The cost of services rose 0.3% in May, led by a sharp increase in the prices for guestroom rentals. Hospital inpatient and outpatient care prices also rose.

The wholesale cost of goods dropped 0.2%, however. Wholesale gas prices fell 1.7% and food costs slipped 0.3%. Food costs have declined in four of the past five months.

Nor does there appear to be much if any inflation in the pipeline. The 12-month cost of partly finished materials turned negative for the first time since 2016 and the price or raw materials have tumbled almost 9% in the past year — also a nearly three-year low.

Big picture: The U.S. faces little threat from inflation, paving the way for the Federal Reserve to cut interest rates if the economy gets any weaker.

Market reaction: The Dow Jones Industrial Average DJIA, +0.30% and S&P 500 SPX, +0.47% were set to open higher in Tuesday trades. Stocks have risen for five straight sessions, spurred in part by rising expectations the Federal Reserve will cut interest rates soon.

The 10-year Treasury yield TMUBMUSD10Y, +0.81% rose to 2.17%. It’s been creeping higher since falling to a nearly two-year low of 2.06% last week.

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