ILCB - Commodity Inflation Is Coming Under Control

• Last Tuesday, while the Federal Open Market Committee was meeting in Washington, DC, the Labor Department reported that the Producer Price Index (PPI) rose 0.8% in May, which is significantly higher than the economists’ consensus estimate of a 0.5% increase.
• Food prices rose 2.6% in May, while overall energy prices rose 2.2%. The core PPI, excluding food, energy, and trade margins, rose 0.7% in May.
• Right now, due to moderating commodity prices in June, inflation appears to be transitory, as the Fed had been anticipating.
• In the May retail sales report, the Commerce Department announced that retail sales declined 1.3%, significantly worse than the economists’ consensus expectation of a 0.8% decline. The report shows how people react to higher prices.

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