May PPI rose just .2%, .4% less than expected and is down 5% y/o/y. The core unexpectedly fell .1% vs a forecasted gain of .1% and is up 3% y/o/y. At the headline level, the 2.9% gain in energy was partially offset by a 1.6% drop in food prices. Keeping a lid on the core was a .3% drop in prescription drug prices after a 1.3% gain in April. With our healthcare system, that is certainly an outlier. Apparel prices fell .1%. Car prices rose .1% while trucks were flat. Inflation in the pipeline though is beginning to perk up as headline intermediate goods prices rose .3%, the first gain since July ’08 and the core drop of .2% was the smallest since Sept ’08. May Housing Starts were 47k higher than expected at 532k annualized, led by gains in both single family and multi family. In terms of inventories, less would have been better but it’s just a bounce from the April record low. Permits were 10k more than expected at 518k.
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