The U.S. Producer Price Index also dropped 0.4% in May. The core rate was more or less unchanged, indicating that inflation is still not a concern for its central bankers. But it is also a sign that companies still don’t have pricing power.

BMO Nesbitt burns notes that the drop in the headline number was the largest in four months, feeling the weight of energy costs, which were down 2.3% as gasoline dropped 9.6%, and food, which fell 0.2%. “Compared to a year ago, producer prices declined by 2.7%, just shy of the record declines posted in January and February. As well, core PPI inflation dropped to a paltry 0.1% year over year, among the smallest annual increases on record.”

CIBC World Markets comments that the weak PPI reinforces the weak retail report’s message that the U.S. Federal Reserve Board will remain on hold for the time being. “Though today’s report spans only part of the overall inflation picture, it suggests that price pressures on the goods side at least remain anemic. The dollar’s recent slide clearly hurts one of the props of the low inflation story. But other no less important ones remain intact. Productivity growth remains nothing short of spectacular. And at near 75%, capacity use levels in the factory sector are still 10%-pts below levels that historically have heralded the onset of inflation.”

“The softer-than-expected producer price numbers for May support our view that inflation is unlikely to rise this year,” says BMO.

Although, CIBC warns that the lack of pricing power among factory firms adds to concerns about the near term earnings outlook.