U.S. wholesale inflation accelerated sharply in May, reaching its highest annual level in more than three years as energy prices continued to climb and fuel concerns about rising costs across the economy.
New data released Thursday by the Bureau of Labor Statistics showed that the Producer Price Index, commonly known as the PPI, increased 1.1% during May. On an annual basis, wholesale prices rose 6.5%, marking the largest year-over-year increase since November 2022.
The report exceeded expectations from economists, many of whom had predicted a smaller monthly increase. The latest figures also matched April’s revised monthly gain of 1.1%, signaling that inflationary pressures remain persistent.
Energy prices led the increase
Energy costs played the biggest role in driving wholesale inflation higher during May.
The Bureau of Labor Statistics reported that prices for final demand goods increased 2.8% during the month. Officials said the gain was the largest monthly increase since the current data series began in December 2009.
Energy prices jumped 10.7%, making them the primary source of the increase.
Gasoline prices posted the most dramatic rise. Wholesale gasoline costs surged 23.4% during May and accounted for more than half of the overall increase in goods prices.
Several other energy-related products also recorded notable gains. Diesel fuel, jet fuel, industrial chemicals and plastic resins all moved higher during the month.
Services prices also moved higher
While goods prices drove most of the inflation increase, services costs also climbed.
Prices for final demand services rose 0.3% in May. Portfolio management services generated the largest increase, advancing 4.8% during a month when stock markets remained relatively strong.
Transportation-related services also contributed to the rise. Truck freight transportation and securities brokerage services both recorded gains during the month.
The increases suggest inflation pressures are extending beyond physical goods and affecting a wider range of sectors throughout the economy.
Core inflation remained elevated
Economists often monitor core inflation measures to better understand underlying pricing trends.
After removing food and energy prices, core PPI increased 0.4% during May.
Another closely watched measure, which excludes food, energy and trade services, climbed 0.8% for the month. That represented the strongest reading since March 2022.
On an annual basis, this broader inflation gauge reached 5.1%, its highest level since October 2022.
The figures indicate that inflation pressures remain elevated even after accounting for traditionally volatile categories such as food and energy.
Food prices and supply chain costs increased
Food prices also rose faster in May than they did in April.
Wholesale food costs increased 0.6% during the month, compared with a 0.2% gain in April.
Not every category moved higher. Pork prices fell 10.1%, while residential electric power and sanitary paper products recorded declines.
Further up the supply chain, costs continued to rise.
Prices for processed goods used in intermediate demand increased 3.5% during May. Unprocessed goods climbed 4.9%.
Compared with a year earlier, unprocessed goods prices surged 22.2%. That marked the largest annual increase for the category since September 2022.
Inflation concerns remain in focus
The wholesale inflation report arrived one day after the Bureau of Labor Statistics released its latest Consumer Price Index data.
That report showed consumer inflation rose 4.2% annually in May. Higher energy costs linked to ongoing tensions in the Middle East were cited as a major factor behind the increase.
The latest wholesale data suggests businesses continue to face rising costs, which could eventually affect prices paid by consumers if companies pass those expenses along.
Source: This article is based on reporting by Quartz and data from the U.S. Bureau of Labor Statistics.
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