Wholesale inflation in May hit highest level since November 2022 on soaring energy costs

Wholesale inflation shot up in May to its highest level since November 2022 as higher energy costs amid the Iran war weighed on the economy – likely keeping the Fed from slashing interest rates anytime soon.The Producer Price Index rose 6.5% in May over the past 12 months, the Bureau of Labor Statistics said Thursday – the fastest rate since hitting 7.4% in 2022 amid higher energy costs and supply chain snags.Over the month, the PPI soared 1.1%, matching its April increase and surpassing expectations of a 0.7% gain.“Thursday’s elevated PPI print is yet another data point that could push the Federal Reserve to hike interest rates, as it’s clear that all of the main measures of inflation are flashing red,” Clark Bellin, president and chief investment officer of Bellwether Wealth, said in a note Thursday.“We acknowledge that this inflationary spike is likely temporary and will subside once the Iran war ends, but there is increasing concern that the Iran conflict will persist for some time, which means higher oil prices and higher inflation.”The vast majority of traders anticipate the Fed will keep interest rates steady at its meeting next week – but odds of a rate hike at the subsequent meeting in July jumped above 12% Thursday, according to CME FedWatch, which tracks 30-Day Fed Funds futures prices.Excluding food and energy, the core PPI gained just 0.4% over the month, indicating that much of the higher inflation rate is being driven by energy costs as the Strait of Hormuz remains largely blockaded.The figure came in below expectations of a 0.5% rise.Without food, energy and trade services, the PPI rose 0.8% – its largest monthly gain since March 2022.

On a yearly basis, the figure gained 5.1% at its fastest rate since October 2022.Eighty percent of the rise in final demand goods prices came from a 10.7% surge in energy prices in May alone, according to the BLS.The index for gasoline soared 23.4%, and prices for diesel, jet fuel, plastic resins a...