Inflation spiked to 6.5% in May in producer index, highest since 2022

Inflation, as measured by the producer price index, soared eight-tenths of a percentage point to 6.5% for the year ending in May, the Bureau of Labor Statistics reported Thursday, driven by higher energy costs from the war in Iran.The inflation rate was the highest since November 2022, when inflation spiked under President Joe Biden and doomed Democrats politically.The rise in producer inflation suggests that faster price gains are also in store for households already hard-hit by the higher cost of living. That is a major warning sign for the economy, and for the political prospects of President Donald Trump and Republicans.

Economists have been closely examining inflation reports, given the war with Iran and fears that the energy price spikes caused by the conflict will translate to higher overall inflation.

INFLATION ROSE TO 4.2% IN MAY, HIGHEST IN THREE YEARS, AS IRAN WAR SPIKED ENERGY PRICES

The index was up 1.1% just in the month of May. The bulk of that increase was driven by higher energy prices, which were up a massive 11% month-to-month.

“[A]t some point the dam is going to break and companies will have to pass the higher energy costs from the Iran conflict on to the consumer,” FWDBonds chief economist Chris Rupkey wrote in a note on the report.