SAO PAULO, July 4 (Reuters) - Brazil's producer price

index (PPI) fell 1.29% in May, reaching the lowest level since

2023, statistics agency IBGE said on Friday.

Producer prices in May contracted from a 0.12% drop in the

previous month, IBGE said in a statement, marking the sharpest

fall this year and the biggest decline since a 2.72% drop in

June 2023. May's data also marks a fourth straight month in the

negative.

May saw a downward trend across most of the industry,

according to IBGE, which added that so-called intermediate goods

- products used in production such as iron ore and sugar - were

the main driver in May.

IBGE's producer price index manager Murilo Alvim noted that

lower commodity prices had contributed, resulting a lower cost

of production, while a stronger Brazilian real had also helped

reduce costs in some sectors for goods traded in U.S. dollars.

Since the start of 2025, producer prices in Latin America's

largest economy shrank 1.97%, while in the accumulated reading

for the 12 months through May hit 5.78%.

Brazil's central bank targets inflation at 3% plus or minus

1.5 percentage points.

Despite slowing down more than expected in May, inflation in

the country still remains at 5.32% in the 12 months through May,

IBGE data showed.

Even as prices have dipped, Brazil's central bank last month

hiked its benchmark interest rate to 15% - its highest level in

almost 20 years.