Key facts
- US wholesale inflation (PPI) surged to an annual 6.5% in May.
- This is the highest level since November 2022.
- Core PPI, excluding food and energy, increased by 4.9% annually.
- Monthly PPI inflation was 1.1% in May, with core PPI up 0.4%.
- Energy prices contributed significantly, with annual PPI for energy rising 36.6%.
US wholesale inflation surged to an annual 6.5% in May, reaching its highest level since November 2022, primarily driven by a significant increase in energy prices linked to the Mideast Gulf war. The producer price index (PPI) data, released by the Bureau of Labor Statistics (BLS), showed a notable acceleration from 5.7% in April and 4.3% in March.
Economists had anticipated a median PPI gain of 6.4%. Core PPI, which excludes volatile food and energy components, showed a more moderate increase of 4.9% annually, matching its April figure. On a monthly basis, PPI inflation stood at 1.1% for the second consecutive month, with core PPI rising by 0.4%.
Pantheon Macroeconomics noted the report indicates an intensifying shock to goods prices and a rise in underlying services prices. The firm anticipates inflation will fall sharply by year-end as wage and rent growth slows and tariff-related price increases drop out.
The PPI figures follow the BLS's report of a 4.2% annual increase in the consumer price index (CPI) for May, the highest in three years. Market futures indicate a 98% probability that the Federal Reserve will maintain its target rate at its June 17 policy meeting, with nearly 70% odds of a quarter-point increase by year-end.
Producer prices for goods saw an annual increase of 10.4% in May, up from 7.4% in April, while services prices rose by 4.9%. Energy prices were a major contributor, with energy PPI surging 36.6% annually, following a 22.7% rise in April. Export energy prices increased by 72.3% annually. Food PPI rose 2.6% in May.