(Bloomberg) -- US producer prices unexpectedly declined in May by the most in seven months, another welcome development that will strengthen the Federal Reserve's confidence in moderating inflation.
The producer price index for final demand decreased 0.2% from a month earlier, lower than all estimates in a Bloomberg survey of economists. Compared with a year ago, the PPI rose 2.2%, Bureau of Labor Statistics data showed Thursday.
The PPI report follows May consumer price data that showed a broad cooling. Fed officials have since July held their benchmark interest rate at the highest level in more than two decades. On Wednesday, they penciled in just one cut this year as they await further progress on inflation.
Nearly 60% of the decline in the May PPI for goods was due to gasoline costs. Prices also fell for diesel fuel, commercial electric power and jet fuel. Goods prices overall decreased 0.8% — the most since October. Services costs were unchanged.
Stock-index futures rose and Treasury yields fell after the PPI figures and a separate report showing weekly initial unemployment claims increased to the highest level since August.
Several categories in the PPI report that are used to calculate the Fed's preferred inflation measure — the personal consumption expenditures price index — were softer in May than a month earlier.
Among those, airfares fell 4.3% and prices for portfolio management services decreased 1.8%. Physician care costs were flat and the cost of hospital outpatient care rose 0.5%. The May PCE price gauge is due later this month.
Stripping out food, energy and trade services, which is an even-less-volatile PPI measure, prices were flat compared with the prior month, the tamest in a year.
Costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, decreased 1.5% — the most since the end of 2022. That reflected plunging energy costs.
--With assistance from Chris Middleton, Mark Niquette and Daniel Neligh.
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