Implications of US PPI for PCE? - Nomura

Analysts at Nomura explained the implications of PPI Report for Core PCE Inflation.

Key Quotes:

"The relevant elements of the PPI report seem to contribute less to core PCE inflation in May than in April. The price index for scheduled passenger air transportation fell 4.1% m-o-m in May, following a 0.9% rise in April. 

Portfolio management service fees continued to increase, but at a slower pace than in April. As for medical care-related items of PPI, hospital service prices were down by 0.2% m-o-m and physician service prices were essentially unchanged. 

Although we expect components of core PCE price index derived from corresponding CPI data to show higher inflation in May, PPI-based components might not make a significant positive contribution to core PCE inflation."