The producer price index (PPI) for final demand went down by 0.2 per cent in May 2024 across the United States, following a 0.5 per cent increase in April and a slight 0.1 per cent decline in March.

The Bureau of Labor Statistics (BLS) reports that the decline in final demand prices in May was primarily driven by a significant 0.8 per cent drop in the index for final demand goods. Meanwhile, the prices for final demand services remained unchanged, providing a stabilising effect on the overall PPI. 

This indicates that the fluctuation in goods prices had a more pronounced impact on the overall index compared to services. When excluding the more volatile categories of foods, energy, and trade services, the index for final demand remained flat in May, after having increased by 0.5 per cent in April. 

For the year ending in May, this core index, which provides a clearer picture of underlying inflation trends by omitting these volatile components, increased by 3.2 per cent.

Final demand goods

In May, the prices for final-demand goods decreased by 0.8 per cent, marking the largest decline since a 1.2 per cent drop in October 2023. This decrease was primarily driven by a significant 4.8 per cent fall in the index for final demand energy. 

Additionally, prices for final-demand foods edged down slightly by 0.1 per cent. However, when excluding the volatile categories of foods and energy, the index for final demand goods rose by 0.3 per cent, indicating mixed movements within the broader goods category.

A substantial portion of the May decrease in final demand goods prices—nearly 60 per cent—was attributed to a steep 7.1 per cent decline in gasolene prices. Other notable declines included diesel fuel, chicken eggs, electric power, jet fuel, and basic organic chemicals.

On the other hand, prices for some items, such as cigarettes, which rose by 3.3 per cent, as well as hay, hayseeds, oilseeds, and residual fuels, experienced increases, highlighting the diverse pricing dynamics within the goods sector.

Final demand services

In May, prices for final demand services remained unchanged after a 0.6 per cent increase in April. Within this category, the index for final demand trade services and the index for final demand services less trade, transportation, and warehousing rose by 0.2 per cent and 0.1 per cent, respectively. 

However, these gains were offset by a 1.4 per cent decrease in prices for final-demand transportation and warehousing services, which contributed to the overall stagnation in service prices. A closer look at the product details reveals significant variations within the final demand services. 

Margins for fuels and lubricants retailing surged by 12.2 per cent, and there were increases in the indexes for food and alcohol retailing, outpatient care, automobile and automobile parts retailing, and apparel, footwear, and accessories retailing. On the other hand, airline passenger services saw a notable price decline of 4.3 per cent. 

Additionally, prices fell for machinery and vehicle wholesaling, professional and commercial equipment wholesaling, portfolio management, and truck transportation of freight, highlighting the mixed pricing trends within the service sector.