Wholesale inflation surged in May, with the Producer Price Index (PPI) for final demand rising 1.1% after increasing 1.1% in April and 0.7% in March.
Producer prices were up 6.5% from a year ago, marking the largest 12-month increase since November 2022.
Energy prices drove much of the increase, with gasoline prices jumping 23.4% and overall energy costs rising 10.7% during the month.
Hang onto your wallet. Inflation at the wholesale level – before it reached the retail marketplace – accelerated in May, driven largely by surging energy costs that pushed producer prices to their fastest annual pace in more than two years.
The Producer Price Index for final demand rose 1.1% in May on a seasonally adjusted basis, matching April's increase and following a 0.7% gain in March, according to the Bureau of Labor Statistics. Compared with a year earlier, producer prices climbed 6.5%, the largest 12-month increase since November 2022.
The latest report suggests inflationary pressures remain entrenched in the supply chain despite hopes that price increases would continue moderating in 2026.
Nearly 80% of May's increase in the headline index came from a 2.8% jump in prices for final-demand goods, the largest monthly increase in that category since the government began calculating the data in December 2009. Final-demand services prices rose a more modest 0.3%.
Energy was the culprit
Energy costs were the dominant factor behind the increase. Prices for final-demand energy goods surged 10.7%, accounting for most of the rise in goods inflation. Gasoline prices alone jumped 23.4%, contributing more than half of the overall increase in final-demand goods prices.
Other notable increases included diesel fuel, jet fuel, plastic resins and materials, industrial chemicals, and natural gas liquids. Some categories moved in the opposite direction, however, with pork prices falling 10.1% and declines also recorded for residential electric power and sanitary paper products.
Underlying inflation measures also showed renewed strength. The index for final demand excluding food, energy and trade services increased 0.8% in May, the largest monthly gain since March 2022. Over the past 12 months, that core measure rose 5.1%, the biggest annual increase since October 2022.
Costs for services are also rising
Service-sector inflation remained elevated, though less dramatic than goods inflation. Prices for final-demand services rose 0.3%, led by a 0.7% increase in services excluding trade, transportation and warehousing. Transportation and warehousing services advanced 2.6%.
Portfolio management prices climbed 4.8%, accounting for more than 40% of the increase in service-sector prices. Higher costs were also reported for freight trucking, securities brokerage and investment advice, chemicals wholesaling, food wholesaling and airline passenger services.
At the same time, trade margins declined. The index for final-demand trade services fell 1.1%, reflecting narrower margins for wholesalers and retailers. Margins for machinery and equipment wholesalers dropped 1.9%, while fuels and lubricants retailing and residential real estate loan services also posted declines.