June 13, 2014 10:30 AM, EDT

Wholesale Prices Fall 0.2% in May

Wholesale prices in the U.S. unexpectedly fell in May, suggesting demand isn’t robust enough to push inflation closer to the Federal Reserve’s target.

The 0.2% decrease in the producer price index compared with the median estimate in a Bloomberg survey of 71 economists that called for a 0.1% gain. Over the past 12 months, costs climbed 2%, figures from the Labor Department showed today.

The May dip, the first in three months, suggests pricing power hasn’t yet materialized as the global economy is slow to accelerate. Muted costs are a problem for Federal Reserve policy makers, who have said they want inflation to increase closer to their 2% goal, a sign they will keep interest rates low well into 2015.

“Producer price inflation is still fairly contained despite the big increases in the last few months,” Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut, said in a research note.

The May PPI decrease followed a 0.6% gain the prior month. Forecasts in the Bloomberg survey ranged from a drop of 0.3% to a 0.5% gain.

The advance from the same month a year before was smaller than the 2.1% rise in the year to April.

The so-called core measure, which strips out volatile food and fuel, decreased 0.1% after rising 0.5% in the prior month. It was projected to rise 0.1%, the survey median showed.