"Inflation will creep higher over the summer."
- Standard Chartered
Prices of finished goods and services sold by manufacturers in the US jumped 0.5% in May of this year, while exceeding the average economists' estimates of a 0.4% increase. This data follows four straight months of missing expectations, when three of them posted a decline. Therefore, the May numbers are pointing to a considerable improvement is sentiment among producers, which are favouring to increase prices, as the world's biggest economy is getting back on track. In the meantime, the annual indicator for producer prices decreased from 1.3% to 1.1% in May, matching expectations. The core reading, which excludes volatile items, such as food, energy and trade, was up just 0.1% last month on a monthly basis and 0.6% year-on-year, also swinging back to growth.
The producer prices are usually passed to consumer in the foreseeable future, meaning that the headline CPI is likely to show a positive development as well. The latter gauge is closely watched by the Federal Reserve, which is preparing for a first benchmark rate's hike later this year. Consensus forecast is September 2015; however, analysts' views diverge on the timing of this event. Meanwhile, the Fed is also tracking the labour market changes, and the rate of unemployment will play a decisive role, when making the step of raising rates for the first time since 2006.
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