President Donald Trump’s latest Iran war pitch to American consumers: Short-term pain will bring long-term gain. But Tuesday’s ugly consumer inflation report, Wednesday’s uglier wholesale inflation report and some worrying bond market signals all point to one thing.
The pain will not be short-lived.
Wednesday’s Producer Price Index report showed the war with Iran is raising costs for US businesses at a rate not seen in nearly four years, increasing the likelihood that companies will pass on those higher costs to consumers.
PPI, a measure of wholesale inflation, increased in April to 6% on an annual basis from 4% in March, well exceeding economists’ expectations. On a monthly basis, the index increased 1.4%, according to data released Wednesday by the Bureau of Labor Statistics. That’s twice the pace that economists expected. It’s also the second-largest monthly gain dating back to the index’s inception in 2010.
A 15.6% increase in gas prices accounted for 40% of the increase in prices businesses paid last month. That only looks to be getting worse with oil prices yet to reach their peak levels and global inventories falling at a record pace, according to a report released Wednesday by the International Energy Agency.
