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Economic Watch: Wholesale Prices Fall, Consumer Sentiment Dips

June 13, 2014

By Evan Lockridge

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Prices at the wholesale level declined in May for the first time in three months, according to new U.S. Labor Department figures, while a separate report shows consumer sentiment fell slightly but is relatively stable.

The 0.2% drop in the Producer Price Index follows increases of 0.6% in April and 0.5% in May, while moving up 2% from the same time a year ago.

Core prices, which strip out the volatile food and energy sectors, fell 0.1% in May from April, and increased 2% compared to the same time in 2013.

The price of goods fell 0.2% in May from the month before, led by a drop in the wholesale cost of energy, while the price of services also decreased 0.2%.

“Both the headline and core PPI reports came in under expectations, easing concerns price pressures were reversing course,” said Lindsey Piegza, chief economist at the investment firm Sterne Agee. “A potential catalyst for a change in monetary policy [by the Federal Reserve], inflationary pressures reported in April appear to be short lived.”

The Federal Reserve is closely watching for any potential inflation pressures as it has been rolling back bond purchases and looking at raising interest rates, while Piegza noted her firm does “not expect any change in policy, save a continued reduction in monthly bond purchases by $10 billion.” The Fed’s goal is to keep inflation under 2%.

Meantime, consumer confidence in the U.S. slipped to a three-month low in June, according to the Thomson Reuters/University of Michigan Consumer Sentiment Index.

It fell from 81.9 in May to 81.2 while the component measuring expectation six months ahead fell to a three-month low and the current conditions index of consumers moved higher.

"The change from May was too small to indicate a significant loss in sentiment," said Richard Curtin, survey director. "The small month-to-month variations aside, the main finding from the recent surveys is that consumers have maintained their expectations at reasonably favorable levels for the past six months."

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