According to the U.S. Bureau of Labor Statistics, the Producer Price Index (PPI) for final demand decreased by 0.3% in May. This follows a 0.2% increase in April and a 0.4% decline in March. On an unadjusted basis, the index for final demand rose by 1.1% for the 12 months ending in May.
The decline in the final demand index can be attributed to a 1.6% decrease in prices for final demand goods, while the index for final demand services increased by 0.2%.
Prices for final demand, excluding foods, energy, and trade services, remained unchanged in May after a slight increase of 0.1% in April. Over the 12 months ending in May, this category saw an overall increase of 2.8%.
Final demand goods experienced a significant decline of 1.6% in May, primarily driven by a 6.8% drop in the index for final demand energy. Prices for final demand foods also decreased by 1.3%. However, the index for final demand goods, excluding foods and energy, increased by 0.1%.
Among the notable factors contributing to the decline in final demand goods were a 13.8% drop in gasoline prices, along with decreases in diesel fuel, chicken eggs, jet fuel, and certain vegetables. On the other hand, tobacco products saw a 1.7% increase, and the indexes for electric power and beverages and beverage materials also rose.
In the final demand services category, the index increased by 0.2% in May, following a 0.3 percent advance in April. Margins for final demand trade services rose by 1.0%, while prices for final demand services, excluding trade, transportation, and warehousing, edged up by 0.1%. However, the index for final demand transportation and warehousing services declined by 1.4%.
A significant portion of the increase in prices for final demand services can be attributed to a 4.2% rise in margins for automobiles and automobile parts retailing. Conversely, truck transportation of freight experienced a 2.1% decrease, and the indexes for portfolio management and health, beauty, and optical goods retailing also declined.
The softwood lumber industry experienced a substantial decline, with Producer Price Index for intermediate demand plummeting by 40.4% over the 12-month period from May 2022 to May 2023. In contrast to softwood lumber, the hardwood lumber sector witnessed a relatively moderate decline of 17.8% over the same 12-month period. However, there was a noteworthy increase of 7.6% in index from January to February, offering a temporary respite.
Millwork products experienced a milder decline, with index dropping by 5.2% during the 12-month period. The plywood industry faced a significant index decline of 21.4% over the 12-month period.
The paper and paperboard index increasing by 3.7% and the paper boxes and containers industry experienced a modest index increase of 3.6% over the 12-month period. The building paper and board industry faced significant challenges, with index plummeting by 33.9%.
