Producer price inflation (final manufactured goods) slowed to +0.1% y/y in May from +0.5% in April, marking the lowest reading yet this year. The print was lower than Bloomberg consensus estimates of +0.5% y/y.

May’s lower PPI reading was mainly driven by ‘food’ and ‘coke, petroleum & chemical products’.

• ‘Food’ inflation slowed notably to +3.0% y/y from +4.9% y/y in April, marking the lowest reading since April 2024.
• ‘Coke, petroleum & chemical products’ reported deflation of -6.4% y/y from -5.5% y/y in April as diesel and petrol moved further into deflationary territory (-15.1% y/y and -18.7% y/y, respectively).

Most other key categories also reported lower PPI readings in May, contributing to the very low headline reading.

Two exceptions were ‘transport equipment’ (+0.2% y/y in May from -3.8% y/y in April) and ‘paper & printed products’ (-2.9% y/y in May from -3.5% y/y in April).

Finally, PPI for intermediate goods slowed to +6.9% y/y in May from +8.5% y/y in April.

Why does it matter?

May marks three consecutive months of PPI below +1.0% y/y, suggesting that inflationary pressures remained subdued through most of H1 2025.

The latest slowdown in the PPI should also ensure that possible accelerations in future CPI should be moderate and occur gradually. This is particularly true of food inflation. If food producer prices continue to see slower inflation, consumer food price inflation could well remain anchored near its current historical low.

Looking ahead, a sharp increase in oil prices during June is likely to start putting upward pressure on fuel costs and could begin to reverse fuel deflation. As such, producer price inflation is likely bottoming out and should begin to rise gradually through the second half of 2025.