Two economic reports gave mixed signals on the strength of U.S. inflation today.

U.S. wholesale prices registered the biggest decline in more than two years as energy prices tumbled in May. However, the core index, which excludes food and energy items, rose 0.1%.

The producer-price index for finished goods fell 0.6%, fully reversing the previous month’s increase, the U.S. Labor Department said today. The drop mostly reflected a slump in energy prices.

Economists head expected the PPI to decline by 0.2% in May, with core nonfood, non-energy prices up 0.2%.

In year-on-year terms, the producer-price index was up 3.5% in May, down from a 4.8% rate in the year through April.

Energy prices fell 3.5% during the month, according to the report, while food prices fell 0.3%. It was the sharpest drop in oil prices since April 2003, as oil prices fell 7.2% following three months of sharp increases ahead of the the war in Iraq. The 0.6% fall in the overall PPI was also the biggest percentage drop since April 2003.

Tuesday’s report comes a day ahead of the Consumer Price Index, which measures prices on the retail level. Economists forecast that the CPI gained 0.1% in May after a 0.5% increase in April, while the core CPI is expected to be up 0.2% after being essentially unchanged the previous month.

Separately, U.S. retail sales decreased a seasonally adjusted 0.5%, after advancing 1.5% in April, the Commerce Department said today. April sales were originally seen rising 1.4%. March sales rose 0.3%, revised down from a previously reported 0.4% increase.

Excluding auto sales, retail sales fell 0.2%. Ex-auto sales were revised up 1.4% in April versus an initial reading of a 1.1% increase.

Economists had expected a 0.2% decline in total retail sales, but a modest 0.2% increase when auto sales are excluded.