The specter of higher-than-2% inflation has loomed over the economy since the pandemic. But just as it seemed like the Fed had clawed its way out of unpopular rate hikes, a war with Iran has dragged it right back in.
Producer prices climbed 6.5% over the past year, the Bureau of Labor Statistics reported Thursday, the steepest annual jump since November 2022. A day earlier, consumer prices came in at 4.2%, the hottest since 2023. Both were driven by soaring energy costs as the Strait of Hormuz remains choked off.
Wholesale gasoline leaped more than 23% in a month, the BLS reported, which pulled up everything that runs on fuel: jet fuel, freight, trucking, diesel. Agricultural materials overall rose 14% in May alone.
The “core” producer price index, which excludes volatile food and energy costs, rose 0.4%, below the consensus view of 0.5%—indicating to some analysts that inflation isn’t broadening month-to-month.
Mohamed El-Erian noted the print came in “hotter than expected at the headline level but softer at the core level”—a sign, he wrote, that “the PPI spillover from energy into broader prices remains relatively muted for now.”
