Investment Rating - The report suggests a modest increase in producer prices, indicating limited signs of abnormal price increases due to tariffs, which may lead to a soft core PCE inflation expectation of 0.14% MoM in May [1][4][5] Core Viewpoints - Producer prices rose by 0.1% MoM in May, following a revised decline in April, suggesting that tariff impacts on prices may not yet be fully realized [1][4] - Core goods prices increased by 0.2% MoM, while core services prices remained flat, indicating a mixed inflationary environment [5][6] - The report anticipates that inflationary pressures are easing, which may provide confidence to Federal Reserve officials regarding future monetary policy adjustments [6][8] Summary by Sections - **PPI Overview**: Producer prices increased by 0.1% MoM in May, with core measures also reflecting a similar increase, although this was softer than expected [4][6] - **Inflation Expectations**: A 0.14% MoM increase in core PCE inflation is expected for May, with year-on-year core PCE potentially rising to 2.6% [5][7] - **Tariff Impact**: The report notes that significant tariffs, such as 50% on steel and aluminum, may affect input goods prices in the coming months, but current data shows limited immediate impact [8][9] - **Airfare Trends**: Airfares are expected to decline by around 1% in May, which is less than previously anticipated, indicating ongoing weakness in travel demand [7][9]