Producer prices fell in May for the first time since last September. A 0.2 percent monthly drop was slightly sharper than expected and steep enough to reduce the annual PPI inflation rate from 3.4 percent to 2.8 percent, its first decrease since March 2016.
Inevitably, the monthly headline decline was led by energy where prices were off 0.8 percent. Excluding this, the PPI actually rose 0.1 percent versus April and was 2.7 percent higher on the year, just a tick short of its annual post last time. Elsewhere, basics were down a monthly 0.1 percent but consumer goods climbed 0.3 percent (non-durables 0.4 percent) and capital goods were 0.1 percent firmer.
Despite May's setback, the trend in overall producer prices remains up and, more significantly, the underlying PPI continues to make steady ground. Various areas of German industry have been reporting capacity issues for some time now and today's pipeline inflation update suggests that pressure on consumer prices from this quarter will continue to build over coming months.