WASHINGTON – Business inflation softened in May as services - including profit margins - were firm, but goods prices counterbalanced with a big decline.
The Bureau of Labor Statistics Tuesday reported the producer price index did what it was expected to do hold steady, reflecting a 3.0% drop in energy prices, driven largely by the 11.2% decline in gasoline. At an earlier stage of processing the gasoline drop was even sharper, down 19.6%.
As often happens, service station operators and dealers in other energy goods "took advantage of the drop in prices to widen their margins," BLS senior analyst Scott Sager told Market News International. Without skyrocketing margins, up 16.1%, overall prices would have been even softer.
Margins also improved 3.7% for clothing stores as the introduction of spring and summer wear was marked by higher prices.
Overall, services prices rose 0.3% after an even stronger 0.4% increase in April. Besides the wider margins for fuel and lubricant dealers and for clothing and shoe stores, margins also rose for machinery dealers, equipment wholesalers and auto dealers.
Goods prices, which play a minor role compared to services in the PPI methodology, declined 0.5%, the biggest drop since February of last year. While most of the decline was in energy goods food prices were also down, edging lower by 0.2%.
The annual change in the PPI was a 2.4% increase through May.
The core rate, excluding the three most volatile components of the report, was down 0.1% and its annual change was an increase of 2.1% through the latest month.
The business inflation reading has been relatively volatile this year, up 0.6% in January, then advancing only 0.2% in February, dropping a tenth in March, rebounding to April's half a percent increase, and then staying flat in May.
Global prices, like that for steel, were a "mixed bag," in May after some previous months reflecting stronger demand.
