Wholesale prices jump 1.1% in May as energy costs surge

Wholesale prices rose 1.1% in May, topping forecasts as energy and gasoline costs drove a fresh increase in pipeline inflation.

Wholesale prices rose more than expected in May, a sign that inflation pressure is still building before it reaches consumers, the Bureau of Labor Statistics reported Thursday.

The producer price index, which tracks final demand costs, increased a seasonally adjusted 1.1% for the month. Economists surveyed by Dow Jones had expected a 0.7% increase. The gain pushed the 12-month wholesale inflation rate to 6.5%, the highest since November 2022.

The headline increase matched April’s monthly rise and was driven largely by energy. Excluding food and energy, core PPI rose 0.4%, below the 0.5% consensus estimate, suggesting fuel costs accounted for much of the latest inflation burden.

Goods prices were the main source of the acceleration. Final demand goods prices rose 2.8%, the largest increase in a data series dating to December 2009, and nearly 80% of that gain came from a 10.7% increase in energy, according to the report. Wholesale gasoline prices climbed 23.4%.

A broader core measure that strips out food, energy and trade services rose 0.8% in May, its largest one-month increase since March 2022. Over 12 months, that measure was up 5.1%, the strongest reading since October 2022.

Services also contributed to the increase, including a 4.8% rise in portfolio management fees during a strong month for the stock market.

The wholesale report followed a separate inflation reading showing consumer prices up 4.2% in May, also boosted largely by energy. The latest data add to the case for the Federal Reserve to stay cautious when its policy-setting committee announces its next interest rate decision Wednesday. CNBC reported that market pricing pointed to a near-certain expectation that the Fed will hold rates steady, with traders seeing no rate cut through the rest of the year.

Fed officials have largely signaled patience as they assess whether the energy-driven shock fades and inflation returns toward the central bank’s 2% target.