PPI: Input costs continue to tear higher
|Summary
The Producer Price Index for final demand surprised to the upside in May, rising 0.8%. While last week's CPI data already confirmed end prices are rising at the fastest clip in more than a decade, the PPI showed no let-up in sight with intermediate costs continuing to pick up further back in the pipeline.
Staring down the pipeline
Last week's sizable jump in the Consumer Price Index went down relatively easy with markets and Fed watchers as outsized gains in a few categories such as travel and vehicles drove much of the increase. However, May's Producer Price Index (PPI) showed input costs continuing to rise at a heady clip, putting upward pressure on costs beyond a few select industries.
The PPI for final demand rose 0.8% in May, pushing the index up 6.6% over the past 12 months. Higher food and energy costs pushed goods prices up 1.5%, but prices in the larger service sector continued to charge higher as well, up 0.6%.
Further back in the pipeline, prices are generally growing faster. Unprocessed goods for intermediate demand jumped 8.4%, while processed goods rose 2.8%.
It is not just physical input costs continuing to rise either. Even if businesses can find needed parts and materials, getting them comes at an increasingly steep price. Transportation costs for goods rose another 1.7% in May and are up more than 8% over the past year.
Sharp cost increases have become an obstacle for new construction over the past few months, with prices for materials and components for the industry up another 3.9% in May. Although lumber prices have come down over the past couple of weeks, other input costs, such as steel, continue to rise, and with prices across components up 17% year-over-year, input costs will remain a major headwind for the sector.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.