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Wholesale Price Declines Suggest Slower Economy

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Lower prices for food and gas pushed an index of U.S. wholesale prices for May to negative territory and contributed to worries of an economic slowdown.

The Producer Price Index fell by 0.2 percent in May, according to the Bureau of Labor Statistics. Analysts had expected a gain of 0.1 percent. The decline was the first after two consecutive months where the PPI had surprised to the upside.

RBS Securities economist Omair Sharif said inflation at the wholesale level is "still fairly contained" despite big increases in recent months.

That's good news for consumers, but lower prices mean lower profits for business. It also makes paying debts more difficult.

The data suggest that the Federal Reserves target inflation rate of two percent won't soon be reached.

Stripping out food and fuel, wholesale prices fell 0.1 percent in May, compared with a 0.5 percent gain in April.

Michael Carey, economist at Crédit Agricole, said part of the drop compared with April resulted from a "shift in timing of spring purchases due to weather."

Posted-In: Michael Carey Omair Sharif RBS SecuritiesAnalyst Color News Econ #s


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