June 15, 2021- 3:25 p.m.
Producer pricesĀ rose in May by the most on record as the reopening of the U.S. economy fromĀ COVID-19Ā lockdowns gathered momentum.
The producer price index for final demand last month increased at a 6.6% annual pace, quickening from last monthās 6.2% gain, the Labor Department said. The annual reading for May was the hottest since recordkeeping began in November 2010.
The annual data has a “base effects” skew as a result of the price decline that occurred at the beginning of the pandemic.
On a monthly basis, prices rose 0.8%, quickening from last monthās 0.6% increase.
Analysts surveyed by Refinitiv had expected prices to increase 6.3% from a year ago and 0.6% month over month.
Almost 60% of the increase was due to the 1.5% increase in prices for final demand goods. Prices for final demand services rose 0.6%.
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Prices for nonferrous metals spiked 6.9% in May while beef and veal; diesel fuel; gasoline; hay, hayseeds, and oilseeds; and motor vehicles also saw increases. Prices for fresh fruit and melons fell 1.9% primary basic organic chemicals and for asphalt also declined.
Core prices, which exclude food and energy, rose 0.7% month over month and 4.8% annually. Economists had expected increases of 0.5% and 4.8%, respectively.
The recent rise in prices has some investors questioning whether the Federal Reserve will need to alter its policy path after slashing interest rates last year to near zero and announcing unlimited asset purchases in order to combat the economic slowdown caused by lockdowns aimed at slowing the spread of COVID-19.
The Fed is not expected to make changes to its policy at the conclusion of its two-day meeting on Wednesday. However, investors will be looking for signs the central bank is preparing to shift course.
