Wholesale prices see biggest spike since 2022 as energy costs climb
Amidst higher energy prices due to the Iran war, inflation for U.S. businesses surged in May to its highest level since November 2022. The Producer Price Index (PPI), which measures inflation before it reaches consumers, rose by 6.5% in May compared to the previous year. This was reported by the Labor Department on Thursday, with a monthly increase of 1.1% from April, surpassing the 0.6% forecasted by economists.
This spike in inflation comes on the heels of the Consumer Price Index also surging in May to a rate of 4.2%, the fastest pace in over three years. While the PPI doesn’t directly impact consumer prices, if businesses pass on these increased costs to customers, it can contribute to broader inflation.
The data highlights a significant shift in the nation’s inflation outlook, particularly with gas prices remaining high. This resurgence in inflation may prompt the Federal Reserve to maintain its current stance, with speculations of potential interest rate hikes rather than cuts.
The Federal Reserve is expected to keep interest rates unchanged at its upcoming meeting on June 16-17, monitoring the latest inflation figures closely. Elizabeth Renter, a senior economist at NerdWallet, mentioned that the recent inflation data might increase the likelihood of a rate hike in the coming months, but the Fed is likely to wait before making any decisions.
In May, wholesale gasoline prices rose by over 23% from April and nearly 70% from the same period last year. Although gas prices have slightly decreased in June, this isn’t reflected in the latest PPI report as it captures data from the previous month.
Excluding volatile food and energy prices, core wholesale prices increased by 0.4% in May from the previous month and by 4.9% from May 2025. These wholesale prices can provide insights into potential consumer inflation trends, as some components influence the Fed’s preferred inflation measure, the Personal Consumption Expenditures (PCE) index.
Oxford Economics U.S. economist Grace Zwemmer stated that based on the May CPI and PPI data, their PCE tracking nowcast indicates a 0.5% rise in headline prices and a 0.3% increase in core prices in May. This would elevate headline PCE to 4.2%, the highest reading since April 2023.
