Producer Price Index Stumbles 0.2%

The Producer Price Index (PPI) for final demand fell a seasonally adjusted 0.2% for May, according to a Labor Department report (link opens as PDF) released today.

"Final demand" is a more comprehensive indicator than that for finished goods alone. It includes goods, services, and construction sold for personal or government use, capital investment, and export.

After increasing 0.5% for March and 0.6% for April, this latest report proved to be an unpleasant surprise for analysts, who had expected a 0.1% rise. Although cheaper prices could mean cheaper purchases for consumers, it also means smaller sales for producers -- a key ingredient in the recipe for an economic slowdown. 

Source: Labor Department 

Diving deeper, both services and goods prices were behind this latest dip, each down 0.2%. In a sign of some optimism, "core goods" prices (excluding food and energy) managed to remain at April levels. A 0.9% drop in gasoline prices accounted for around half of the entire drop in the final demand goods index.

While this latest report failed to live up to expectations, May's numbers come after two months of solid price improvements. With 12-month price changes at 2%, the second-highest reading since last July (also 2.0%), investors will need to wait for June's report to get a better feel for what is going on with producer prices.

Discover a top stock pick for 2014
Every year, The Motley Fool's chief investment officer hand-picks 1 stock with outstanding potential. Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

The article Producer Price Index Stumbles 0.2% originally appeared on

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story