The Producer Price Index (PPI), which measures inflation on the wholesale level, was also below estimates last month. Headline PPI fell 0.2% in May, with the annual reading also moving lower from 2.3% to 2.2%. Core PPI, which strips out volatile food and energy prices, was flat in May and the year-over-year reading fell from 2.4% to 2.3%.
What’s the bottom line? The favorable CPI and PPI reports brought a double dose of positive inflation news last week. Plus, some of the PPI components are factored into another important consumer inflation measure called Personal Consumption Expenditures (PCE), which is the Fed’s favored measure, and this could lead to a friendly PCE report when that data is released on June 28.