Producer Prices See Modest Rise in May

Prices paid to factories and other producers rose 0.2% in May, reflecting a record increase in prescription drugs and the first rise in energy costs in eight months, the government said Friday.

The seasonally adjusted increase, matching the rise in April, followed a string of five declines, the Labor Department said. Through the first five months of the year, the costs of finished goods measured by the producer price index have fallen at an annual rate of 1.6%.

May’s number was larger than economists expected. But it was distorted by a 10.7% increase in prescription drugs. That, in turn, was driven by a 585% climb in a single subclass of drugs: minor tranquilizers. One drug was primarily responsible for the increase in that subclass, department officials said.

They said confidentiality agreements with survey respondents prevented them from identifying the drug. However, the prices of two popular anti-anxiety drugs have risen steeply this year: clorazepate, the generic version of Tranxene, and lorazepam, the generic version of Ativan.

Without the prescription drug increase, producer prices overall would have been unchanged.

Excluding the volatile food and energy categories, prices increased 0.2%, the same as for the overall index. That reflected both the drug increase and a 2.8% rise in tobacco costs. Tobacco companies are raising prices to pay the multimillion-dollar cost of settling liability lawsuits.

In a separate report, the Commerce Department said business inventories rose a modest 0.2% in April. That’s much smaller than the increases of 0.6% in March and 0.7% in February.

Rapidly rising inventories during the first quarter had led analysts to expect production cutbacks in the second quarter as businesses allowed time for the sale of backlogged goods.

Business sales declined 0.1% in April, while energy costs shot up 0.8%, due entirely to a 4.3% increase in gasoline.

Food prices fell 0.3%, reflecting a 20.9% drop in vegetables, the most in 17 months.