Wholesale prices in the U.S. rose in May as the biggest jump in fuel costs in at least five years swamped muted advances in other categories.
The 0.5 percent increase in the producer-price index followed a 0.4 percent decline the prior month, Labor Department figures showed Friday in Washington. The median forecast of 72 economists surveyed by Bloomberg called for a 0.4 percent advance. Costs dropped 1.1 percent over the past 12 months.
Wholesale-cost gains in two of the past three months may eventually filter through to consumers, helping reassure Federal Reserve policy makers that inflation is progressing toward their target as they consider raising interest rates. At the same time, the fallout from a stronger dollar and slower growth overseas means pipeline price pressures are unlikely to surge.
Inflation will “creep higher over the summer,” Thomas Costerg, a senior economist at Standard Chartered Bank in New York, said before the report. “Energy prices are actually picking up. Commodity costs have generally stabilized.”
Projections in the Bloomberg survey ranged from a drop of 0.1 percent to an advance of 0.7 percent.
Food prices increased 0.8 percent in May, the report showed. Energy expenses climbed 5.9 percent, the biggest gain in data going back to December 2009. That accounted for about 80 percent of the total increase in producer prices, the Labor Department said.
Crude oil costs have shown signs of stabilizing after a plunge to a six-year low of about $43 in mid March. West Texas Intermediate for July delivery was at $60.77 a barrel at the close on Thursday on the New York Mercantile Exchange. That’s still well below last year’s high of $107.26.
Wholesale prices excluding food and energy rose 0.1 percent, matching the median forecast of economists surveyed. It followed a 0.2 percent drop in April. Those costs were up 0.6 percent from May 2014.
Also eliminating trade services to arrive at a reading that some economists at banks such as Morgan Stanley prefer because it strips out one of the most volatile components of PPI, costs declined 0.1 percent last month after rising 0.1 percent. It was restrained by declining margins at securities brokers and decreases in a broad swath of other goods and services, including machinery wholesaling and wireless communications.
The producer price gauge is one of three monthly inflation reports released by the Labor Department, which also produces the import cost measure and the consumer price index, which is due June 18.
A report on Thursday showed import costs climbed 1.3 percent in May from the prior month. They plunged 9.6 percent from May 2014, continuing the string of year-over-year declines since August, as the stronger dollar restrains the price tag for goods made overseas.
One of the industries feeling the fallout is American steel, which is under pressure from record imports. U.S. Steel Corp., the nation’s second-largest producer, cut its full-year profit forecast in April as a strengthening dollar has made foreign steel cheaper for U.S. buyers. The slump in oil prices also has limited orders for steel tubes and pipes.
“We have entered 2015 in a very volatile market and facing significant headwinds from dramatically lower oil prices, lower steel prices, a stronger U.S. dollar and significant import pressure,” Chief Executive Officer Mario Longhi said on a conference call on April 29. “As we progressed through the first quarter, these headwinds became much stronger.”
Inflation may firm up as the economy is rebounding from a slump in early 2015. Retail sales increased 1.2 percent in May from the prior month, helped by a broad-based gain covering 11 of 13 major categories.
The Fed’s preferred inflation gauge, based on personal consumption expenditures, rose 0.1 percent in April from a year earlier, the smallest 12-month gain since October 2009. The index has lingered below the central bank’s 2 percent goal since May 2012.
Fed policy makers are debating when to begin lifting interest rates for the first time since 2006. Chair Janet Yellen on May 22 repeated the central bank’s two criteria for an increase, saying “I will need to see continued improvement in labor market conditions, and I will need to be reasonably confident that inflation will move back to 2 percent over the medium term.”
The Federal Open Market Committee is scheduled to gather on June 16-17. Rates have been kept near zero since December 2008.