In the U.S., the Producer Price Index unexpectedly fell 0.2% in April, although the core rate was up 0.1%.

RBC Financial Group’s economists note that, despite continued rapid increases in energy prices, the U.S. PPI fell by 0.2% in April, largely due to a sharp drop in food prices.

Market expectations had been for a 0.4% rise. Core prices (excluding food and energy) increased by 0.1% as expected, the second consecutive month of rising core prices, says RBC.

“U.S. producer prices fell 0.2% in April, well below expectations, but the figures were not as deflationary as the headline appears,” says BMO Nesbitt Burns. “There were some huge declines in food items: veggies were off 46%, for example. This is noise, not a trend.”

Core pipeline costs for partly finished goods and crude materials have moved up in recent months, following a classic recovery pattern, notes BMO Nesbitt.

“This is not an inflationary threat at this point, with year-to-year readings still down. But it does suggest price firmness is building behind the scenes. The Fed will regard this type of price firmness as good news because they are just as anxious to avoid deflation as they are inflation.”